Operations Management - Exam 1

Given an actual demand of 59, a previous forecast of 64, and an alpha of .3, what would the forecast for the next period be using simple exponential smoothing?

D. 62.5 Multiply the previous period's forecast error (-5) by alpha and then add to the previous period's forecast.

Given the following historical data, what is the simple three-period moving average forecast for period 6?

D. 68 Average demand from periods 3 through 5.

Which of the following is not a benefit of using models in decision making?

D. All of the above are benefits Models are useful tools for making decisions without confronting the actual situation with all of its complexity.

Time-series techniques involve the identification of explanatory variables that can be used to predict future demand.

FALSE Associative forecasts involve identifying explanatory variables.

When new products or services are introduced, focus forecasting models are an attractive option.

FALSE Because focus forecasting models depend on historical data, they're not so attractive for newly introduced products or services.

A control chart involves setting action limits for cumulative forecast error.

FALSE Control charts set action limits for the tracking signal.

Operations managers, who usually use quantitative approaches, are not really concerned with ethical decision-making.

FALSE Ethics issues are touching on all areas of management, including operations.

Exponential smoothing adds a percentage (called alpha) of the last period's forecast to estimate the next period's demand.

FALSE Exponential smoothing adds a percentage to the last period's forecast error.

Once accepted by managers, forecasts should be held firm regardless of new input since many plans have been made using the original forecast.

FALSE Flexibility to accommodate major changes is important to good forecasting.

A forecast method is generally deemed to perform adequately when the errors exhibit an identifiable pattern.

FALSE Forecast methods are generally considered to be performing adequately when the errors appear to be randomly distributed.

Forecasts for groups of items tend to be less accurate than forecasts for individual items because forecasts for individual items don't include as many influencing factors.

FALSE Forecasting for an individual item is more difficult than forecasting for a number of items.

Forecasts based on time-series (historical) data are referred to as associative forecasts.

FALSE Forecasts based on time-series data are referred to as time-series forecasts.

For new products in a strong growth mode, a low alpha will minimize forecast errors when using exponential smoothing techniques.

FALSE If growth is strong, alpha should be large so that the model will catch up more quickly.

Managers should most often rely on quantitative techniques for important decisions since quantitative approaches result in more accurate decisions.

FALSE Just as other techniques do, quantitative techniques have limitations.

The lean production philosophy has been slow to be adopted in service industries.

FALSE Lean concepts apply very well in service industries.

MAD is equal to the square root of MSE, which is why we calculate the easier MSE and then calculate the more difficult MAD.

FALSE MAD is the mean absolute deviation.

A moving average forecast tends to be more responsive to changes in the data series when more data points are included in the average.

FALSE More data points reduce a moving average forecast's responsiveness.

A consumer survey is an easy and sure way to obtain accurate input from future customers since most people enjoy participating in surveys.

FALSE Most people do not enjoy participating in surveys.

National productivity is determined by averaging the productivity measures of various companies or industries.

FALSE National productivity is determined by dividing inputs by outputs across a national economy; averaging industry measures would lead to a distorted estimate.

Operations management and marketing are the two functional areas that exist to support activities in other functions such as accounting, finance, IT and human resources.

FALSE Operations management and marketing are supported by these functions.

A smoothing constant of .1 will cause an exponential smoothing forecast to react more quickly to a sudden change than a smoothing constant value of .3.

FALSE Smaller smoothing constants result in less reactive forecast models.

A systems approach means that we concentrate on efficiency within a subsystem and thereby assure overall efficiency.

FALSE Subsystem efficiency doesn't necessarily translate into overall efficiency.

The T in the model TAF = S + T represents the time dimension (which is usually expressed in weeks or months).

FALSE The T represents the trend dimension.

The naive approach to forecasting requires a linear trend line.

FALSE The naive approach is useful in a wider variety of settings.

Forecasting techniques that are based on time-series data assume that future values of the series will duplicate past values.

FALSE Time-series forecasts assume that future patterns in the series will mimic past patterns in the series.

Trend-adjusted exponential smoothing uses double smoothing to add twice the forecast error to last period's actual demand.

FALSE Trend-adjusted smoothing smoothes both random and trend-related variation.

The naive forecast is limited in its application to series that reflect no trend or seasonality.

FALSE When a trend or seasonality is present, the naive forecast is more limited in its application.

Productivity tends to be only a very minor factor in an organization's ability to compete.

FALSE An organization's ability to compete is directly affected by its productivity.

The manager of a carpet store is trying to determine the best installation crew size. He has tried various crew sizes with the results shown below. Based on productivity, what crew size do you recommend?

A. 2 Crews of two workers are most productive.

A manager uses the following equation to predict monthly receipts: Yt = 40,000 + 150t. What is the forecast for July if t = 0 in April of this year?

A. 40,450 July would be period 3, so the forecast would be 40,000 + 150(3).

A productivity increase in one operation that does not improve overall productivity of the business is not

A. worthwhile. Only system-wide productivity improvement makes the organization more productive.

The primary method for associative forecasting is:

B. regression analysis. Regression analysis is an associative forecasting technique.

Averaging techniques are useful for:

B. smoothing out fluctuations in time series. Smoothing helps forecasters see past random error.

Which is not a characteristic of exponential smoothing?

B. weights each historical value equally The most recent period of demand is given the most weight in exponential smoothing.

The key to successfully competing is understanding what customers want and then __________ satisfy those wants.

C. finding the best way to To successfully compete, two basic issues must be addressed: What do the customers want? What is the best way to satisfy those wants?

Which of the following corresponds to the predictor variable in simple linear regression?

C. independent variable Demand is the typical dependent variable when forecasting with simple linear regression.

Which of the following does not relate to system design?

C. inventory management Inventory management is a system operation decision area.

In the 1970s and early 1980s in the United States, organizations concentrated on:

C. marketing and financial strategies. This led to U.S. firms being not very competitive with regard to their operations.

The mean absolute deviation is used to:

C. measure forecast accuracy. MAD is one way of evaluating forecast performance.

Which of the following factors would tend to reduce productivity?

C. more inexperienced workers More inexperienced workers tend to be less productive.

The external elements of SWOT analysis are:

C. opportunities and threats. Opportunities and threats relate to the organization and its external environment.

For the data given below, what would the naive forecast be for period 5?

D. 61 Period 5's forecast would be period 4's demand.

As long as we match a competitor on quality and price we will gain market share.

FALSE We usually have to better a competitor to win market share.

Measurement of productivity in service is more straightforward than in manufacturing since it is not necessary to take into account the cost of materials.

FALSE Materials cost must be considered in services as well.

The use of models will guarantee the best possible decisions.

FALSE Models are useful, but their use does not guarantee the best decisions.

Companies are either producing goods or delivering services. This means that only one of the two types of operations management strategies are used.

FALSE Most systems involve a blend of goods and services.

Goods producing organizations are not involved in service activities.

FALSE Most systems involve a blend of goods and services.

Special-purpose technology is a common way of offering increased customization in manufacturing or services without taking on additional labor costs.

FALSE Special-purpose technology typically reduces costs through standardization.

The word "technology" is used only to refer to "information technology."

FALSE Technology also refers to the technology involved in resource transformations.

The operations manager has primary responsibility for making operations system design decisions, such as system capacity and location of facilities.

FALSE The operations manager plays a role in these decisions but is not primarily responsible for them.

If a pattern appears when a dependent variable is plotted against time, one should use time series analysis instead of regression analysis.

TRUE Patterns reflect influences such as trends or seasonality that go against regression analysis assumptions.

Tracking productivity measures over time enables managers to judge organizational performance and decide where improvements are needed.

TRUE Productivity trends direct attention toward problems and opportunities.

Curvilinear and multiple regression procedures permit us to extend associative models to relationships that are nonlinear or involve more than one predictor variable.

TRUE Regression analysis can be used in a variety of settings.

Seasonal relatives can be used to deseasonalize data or incorporate seasonality in a forecast.

TRUE Seasonal relatives are used to deseasonalize data to forecast future values of the underlying trend, and they are also used to reseasonalize deseasonalized forecasts.

A seasonal relative (or seasonal indexes) is expressed as a percentage of average or trend.

TRUE Seasonal relatives are used when the seasonal effect is multiplicative rather than additive.

An example of a tactical operations management decision is determining employment levels.

TRUE Staffing is an ongoing, tactical decision.

A modern firm has two supply chain considerations - external links with suppliers and customers, and an internal network of flows to and between the operations function itself.

TRUE Supply chain considerations are at play both in and beyond the modern firm.

Elton Mayo's "Hawthorne Experiment" was the focal point of the Human Relations Movement, which emphasized the importance of the human element in job design.

TRUE The Hawthorne Experiments were the beginning of the Human Relations Movement.

The sample standard deviation of forecast error is equal to the square root of MSE.

TRUE The MSE is equal to the sample variance of the forecast error.

Correlation measures the strength and direction of a relationship between variables.

TRUE The association between two variations is summarized in the correlation coefficient.

Exponential smoothing is a form of weighted averaging.

TRUE The most recent period is given the most weight, but prior periods also factor in.

In order to update a moving average forecast, the values of each data point in the average must be known.

TRUE The moving average cannot be updated until the most recent value is known.

An advantage of a weighted moving average is that recent actual results can be given more importance than what occurred a while ago.

TRUE Weighted moving averages can be adjusted to make more recent data more important in setting the forecast.

In exponential smoothing, an alpha of 1.0 will generate the same forecast that a naive forecast would yield.

TRUE With alpha equal to 1 we are using a naive forecasting method.

A mission statement should provide a guide for the formulation of strategies for the organization.

TRUE Strategy-making is constrained by the mission statement.

The majority of our textbook deals with tactical operations that support established functional strategies.

TRUE This represents the majority of ongoing decision making in operations.

Often, the collective success or failure of companies' operations functions will impact the ability of a nation to compete with other nations.

TRUE A nation is often only as competitive as its companies.

Service often requires greater labor content, whereas manufacturing is more capital intensive.

TRUE Service operations tend to be more labor-intensive than manufacturing.

The Delphi approach involves the use of a series of questionnaires to achieve a consensus forecast.

TRUE A consensus among divergent perspectives is developed using questionnaires.

An advantage of trend-adjusted exponential smoothing over the linear trend equation is its ability to adjust over time to changes in the trend.

TRUE A linear trend equation assumes a constant trend; trend-adjusted smoothing allows for changes in the underlying trend.

Productivity is directly related to the ability of an organization to compete.

TRUE A more productive organization is a more competitive organization.

Bias exists when forecasts tend to be greater or less than the actual values of time series.

TRUE A tendency in one direction is defined as bias.

Prior to the Industrial Revolution, goods were produced primarily by craftsmen or their apprentices using custom made parts.

TRUE After the Industrial Revolution, more standardized approaches became common.

The purpose of the forecast should be established first so that the level of detail, amount of resources, and accuracy level can be understood.

TRUE All of these considerations are shaped by what the forecast will be used for.

Forecasts based on an average tend to exhibit less variability than the original data.

TRUE Averaging is a way of smoothing out random variability.

Bias is measured by the cumulative sum of forecast errors.

TRUE Bias would result in the cumulative sum of forecast errors being large in absolute value.

Forecasts help managers both to plan the system itself and to provide valuable information for using the system.

TRUE Both planning and use are shaped by forecasts.

Forecasts of future demand are used by operations people to plan capacity.

TRUE Capacity decisions are made for the future and therefore depend on forecasts.

In order to compute seasonal relatives, the trend of past data must be computed or known, which means that for brand-new products this approach cannot be used.

TRUE Computing seasonal relatives depends on past data being available.

Removing the seasonal component from a data series (deseasonalizing) can be accomplished by dividing each data point by its appropriate seasonal relative.

TRUE Deseasonalized data points have been adjusted for seasonal influences.

Productivity is defined as the ratio of output to input.

TRUE Divide outputs by inputs to get productivity.

Among Ford's many contributions was the introduction of mass production, using the concept of interchangeable parts and division of labor.

TRUE Ford made mass production a practical success.

Forecasting techniques generally assume an existing causal system that will continue to exist in the future.

TRUE Forecasts depend on the rules of the game remaining reasonably constant.

Organizations that are capable of responding quickly to changing requirements can use a shorter forecast horizon and therefore benefit from more accurate forecasts.

TRUE If an organization can react more quickly, its forecasts need not be so long term.

A tracking signal focuses on the ratio of cumulative forecast error to the corresponding value of MAD.

TRUE Large absolute values of the tracking signal suggest a fundamental change in the forecast model's performance.

Lean production systems use a highly skilled work force and flexible equipment.

TRUE Lean depends on a skilled workforce.

Lean production systems incorporate the advantages of both mass production and craft production.

TRUE Lean production blends the best of both worlds.

The shorter the forecast period, the more accurately the forecasts tend to track what actually happens.

TRUE Long-term forecasting is much more difficult to do accurately.

Many operations management decisions can be described as tradeoffs.

TRUE Managing tradeoffs is the essence of operations management.

As an abstraction of reality, a model is a simplified version of a real phenomenon.

TRUE Models are valuable abstractions and simplifications of real, complex phenomena.

The best forecast is not necessarily the most accurate.

TRUE More accuracy often comes at too high a cost to be worthwhile.

The naive forecast can serve as a quick and easy standard of comparison against which to judge the cost and accuracy of other techniques.

TRUE Often the naive forecast performs reasonably well when compared to more complex techniques.

Trend-adjusted exponential smoothing requires selection of two smoothing constants.

TRUE One is for the trend and one is for the random error.

The use of a control chart assumes that errors are normally distributed about a mean of zero.

TRUE Over time, a forecast model's tracking signal should fluctuate randomly about a mean of zero.

Business organizations consist of three major functions which, ideally:

A. support one another Finance, Marketing and Operations are these major functions.

Marketing depends on operations for information regarding ___________.

B. lead time Marketing uses lead time information to make promises to customers.

Two widely used metrics of variation are the __________ and the _________.

B. mean; standard deviation The mean and standard deviation summarize important facets regarding the variation in a process.

The responsibilities of the operations manager are:

B. planning, organizing, staffing, directing, and controlling The scope of operations management ranges across the organization.

Operations management involves continuous decision-making; hopefully most decisions made will be:

C. informed Informed decisions incorporate all relevant issues.

Farming is an example of:

C. non-manufactured goods Farm operations are not manufacturing operations.

Which one of the following would not generally be classified under the heading of transformation?

C. staffing Staffing doesn't involve transforming resources so much as it involves acquiring them.

Which of the following is a recent trend in business?

C. supply chain management Supply chain management involves a broader systemic view of operations.

Taking a systems viewpoint with regard to operations in today's environment increasingly leads decision-makers to consider ______________ in response to the ___________.

C. sustainability; threat of global warming Sustainability is a relatively recent operations management consideration.

Product design and process selection are examples of _______ decisions.

C. system design These major decisions affect decisions made at lower levels.

Technology choices seldom affect:

C. union activity. Union activity can affect a firm's technology choices, but not the other way around.

Which of the following statements about variation is FALSE?

D. Any variation makes a production process less productive. The choice to offer customers greater variety might increase variation but increase productivity even more.

Some companies attempt to maximize the revenue they receive from fixed operating capacity by influencing demands through price manipulation. This is an example of __________________:

D. Revenue management Revenue management is used to ensure that as much perishable capacity as possible is sold.

What is credited with gains in industrial productivity, increased standards of living and affordable products?

D. assembly lines Mass production has played a prominent role in increasing standards of living.

Which of the following is not a characteristic of service operations?

D. easy measurement of productivity The productivity of service operations is often hard to measure.

Measurements taken at various points in the transformation process for control purposes are called:

D. feedback Feedback is used to monitor and improve processes.

Budgeting, analysis of investment proposals, and provision of funds are activities associated with the _______ function.

D. finance These are the primary tasks for the finance function.

Which of the following is not an ongoing trend in manufacturing?

D. mass production for greater economies of scale Manufacturers are moving away from mass production for economies of scale.

Which of the following is essential to consider with respect to managing a process to meet demand?

E. all of the above All of these play a role in determining whether a process can meet demand. (strategy, demand forecasts, capacity, random variability)

Operations and sales are the two ________ functions in businesses.

E. line Others are support functions.

Production systems with customized outputs typically have relatively:

E. skilled workers Skilled workers are necessary to accommodate the variation inherent in customized outputs.

Operations Management activities will be less important in the future because many firms are becoming service-oriented operations rather than goods producing operations.

FALSE Operations management is just as important for service firms.

If people would only work harder, productivity would increase.

FALSE Working harder can actually reduce productivity in some cases.

Competitiveness relates to the profitability of an organization in the marketplace.

FALSE Competitiveness relates to how effectively an organization meets the wants and needs of customers relative to other organizations that offer similar goods or services.

Global competition really only applies to multinational organizations.

FALSE Domestic-only organizations experience competition from organizations in other countries.

Improving efficiency will guarantee a similar improvement in productivity.

FALSE Efficiency is narrower than productivity.

Organizational strategy should be determined without considering the realities of functional area strengths and weaknesses since they can be changed to meet our strategy.

FALSE Functional strengths and weaknesses serve as the building blocks of organizational strategy.

Mission statements should be as specific as possible regarding exactly how they will be accomplished.

FALSE Mission statements are very long-term and should provide enough room to accommodate major changes in direction.

Outsourcing tends to improve quality but at the cost of lowered productivity.

FALSE Outsourcing can lead to both quality and productivity improvements.

An organization that is twice as productive as its competitor will be twice as profitable.

FALSE Productivity advantages don't necessarily translate into profitability advantages.

Productivity is defined as the ratio of input to output.

FALSE Productivity is the ratio of outputs to inputs.

Operations managers are responsible for assessing consumer wants and needs and selling and promoting the organization's goods or services.

FALSE Operation managers are not responsible for promoting goods/services.

Most people encounter operations only in profit-making organizations.

FALSE Operations are also relevant to not-for-profit organizations such as the Red Cross.

Operations, marketing, and finance function independently of each other in most organizations.

FALSE Operations, marketing and finance are naturally dependent upon one another.

Assembly lines achieved productivity but at the expense of standard of living.

FALSE Productivity and standard of living go hand in hand.

Service operations require additional inventory because of the unpredictability of consumer demand.

FALSE Service operations cannot use inventory as a hedge against unpredictable demand.

'Value added' by definition is always a positive number since 'added' implies increases.

FALSE Some transformations result in the output being worth less than the inputs.

Government statistics are a good source of data about productivity trends in the service sector.

False The service sector is often omitted in government statistics.

The optimal solutions produced by quantitative techniques should always be evaluated in terms of the larger framework.

TRUE Quantitative techniques have limitations that must be considered.

Services often don't fit simple yield measurements.

TRUE Comparing one service output to another is difficult to do accurately.

The hierarchy and sequence of planning and decision making is: mission, organizational strategy, tactics, and operational decisions.

TRUE Mission is at the highest level of the hierarchy, while operational decisions are at the lowest.

A characteristic that was once an order winner may become an order qualifier, and vice versa.

TRUE Order qualifiers and order winners are shaped by the environment.

Strategy includes both organizational and functional strategies.

TRUE Organizational strategies shape functional strategies.

A business that is rated highly by its customers for service quality will tend to be more profitable than a business that is rated poorly.

TRUE Service quality is a powerful tool for improving profitability.

Standardization has the advantage of reducing variability.

TRUE Standardization leads to reduced variability.

Environmental scanning is a search for events or trends that present either threats or opportunities to the organization.

TRUE These events or trends should be taken into account when strategy is being formulated.

Traditional strategies of business organizations have tended to emphasize cost minimization or product differentiation.

TRUE Time- and quality-based strategies are more recent developments.

Wage and salary increases that are not accompanied by productivity increases tend to exert inflationary pressures on a nation's economy.

TRUE True increases in standards of living come about through productivity improvements.

Service involves a much higher degree of customer contact than manufacturing.

TRUE Customer contact tends to be much higher in services.

The value of outputs is measured by the prices customers are willing to pay for goods or services.

TRUE Customers' willingness to pay for goods or services sets the value of these outputs.

The greater the degree of customer involvement, the more challenging the design and management of operations.

TRUE Greater customer involvement leads to more complexity in the design and management of operations.

One concern in the design of production systems is the degree of standardization.

TRUE How standardized outputs will be is a critical consideration in the system design question.

People who work in the field of operations should have skills that include both knowledge and people skills.

TRUE Operations management requires a blend of knowledge and people skills.

A systems approach emphasizes interrelationships among subsystems, but its main theme is that the whole is greater than the sum of its individual parts.

TRUE Optimizing the performance of individual subsystems does not guarantee optimal performance from the overall system.

The Pareto phenomenon is one of the most important and pervasive concepts that can be applied at all levels of management.

TRUE Pareto phenomena can be observed in a wide variety of organization situations.

An example of an operational operations management decision is inventory level management.

True Inventory management is an operational decision.

An example of a strategic operations management decision is the choice of where to locate.

True Location decisions are strategic in nature.

Gourmet Pretzels bakes soft pretzels on an assembly line. It currently bakes 800 pretzels each eight-hour shift. If the production is increased to 1,200 pretzels each shift, then productivity will have increased by:

A. 50 percent. Divide the difference in productivity by the original productivity.

Suppose a country's productivity last year was 84. If this country's productivity growth rate of 5% is to be maintained, this means that this year's productivity will have to be _______.

A. 88.2 Multiply 84 by 1.05 and then subtract 84 from this product

Accuracy in forecasting can be measured by:

A. MSE MSE is mean squared error.

In trend-adjusted exponential smoothing, the trend-adjusted forecast consists of:

A. an exponentially smoothed forecast and a smoothed trend factor. Both random variation and the trend are smoothed in TAF models.

One reason for using the Delphi method in forecasting is to:

A. avoid premature consensus (bandwagon effect). A bandwagon can lead to popular but potentially inaccurate viewpoints to drown out other important considerations.

A persistent tendency for forecasts to be greater than or less than the actual values is called:

A. bias. Bias is a tendency for a forecast to be above (or below) the actual value.

Which of the following would be least important in the pursuit of a time-based strategy?

A. cost minimization Many means for minimizing cost would have the effect of making a time-based strategy less feasible.

Which is not a significant difference between manufacturing and service operations?

A. cost per unit Manufacturing operations aren't necessarily more or less efficient than service operations.

In order to increase the responsiveness of a forecast made using the moving average technique, the number of data points in the average should be:

A. decreased Fewer data points result in more responsive moving averages.

With regard to operations strategy, organization strategy should, ideally, take into account:

A. operations' strengths and weaknesses. Formulation of organization strategy should take into account the realities of operations' strengths and weaknesses, capitalizing on strengths and dealing with weaknesses.

Modern firms increasingly rely on other firms to supply goods and services instead of doing these tasks themselves. This increased level of _____________ is leading to increased emphasis on ____________ management.

A. outsourcing; supply chain Supply chain management takes a more systemic view of the firm, its operations, and its suppliers.

Which of the following is least likely to affect the cost an organization incurs in producing its products or services?

A. price Relative to the other choices, price is least likely to affect cost.

In the additive model for seasonality, seasonality is expressed as a ______________ adjustment to the average; in the multiplicative model, seasonality is expressed as a __________ adjustment to the average.

A. quantity; percentage The additive model simply adds a seasonal adjustment to the deseasonalized forecast. The multiplicative model adjusts the deseasonalized forecast by multiplying it by a season relative or index.

Product design and choice of location are examples of _______ decisions.

A. strategic These decisions are made high in the hierarchy.

The more novel a new product or service design is, the more forecasters have to rely on:

A. subjective estimates. New products and services lack historical data, so forecasts for them must be based on subjective estimates.

The primary difference between seasonality and cycles is:

A. the duration of the repeating patterns. Seasons happen within time periods; cycles happen across multiple time periods.

A firm pursuing a strategy based on customization and variety will tend to structure and manage its supply chain to accommodate more _____________ than a firm pursuing a strategy based on low cost and high volume.

A. variation Customization and variety lead to variation that must be accommodated.

The weekly output of a fabrication process is shown below, together with data for labor and material inputs. Standard selling price is $125 per unit. Overhead is charged weekly at the rate of $1,500 plus .5 times direct labor cost. Assume a 40-hour week and an hourly wage of $16. Material cost is $10 per foot. What is the average multifactor productivity?

B. 1.457 Calculate multifactor productivity for each week, then average the two.

Given forecast errors of 5, 0, -4, and 3, what is the mean absolute deviation?

B. 3 Convert each error into an absolute value and then average.

Suppose a four-period weighted average is being used to forecast demand. Weights for the periods are as follows: wt-4 = 0.1, wt-3 = 0.2, wt-2 = 0.3 and wt-1 = 0.4. Demand observed in the previous four periods was as follows: At-4 = 380, At-3 = 410, At-2 = 390, At-1 = 400. What will be the demand forecast for period t?

B. 397 The forecast will be (.1 * 380) + (.2 * 410) + (.3 * 390) + (.4 * 400) = 397.

Given forecast errors of 5, 0, -4, and 3, what is the bias?

B. 4 Sum the forecast errors.

The Balanced Scorecard is a useful tool for helping managers translate their strategy into action in the following areas:

B. Customers; Financial; Internal Business Processes; Learning and Growth These are the four core areas addressed by the Balanced Scorecard.

Which of the following is not a step in the forecasting process?

B. Eliminate all assumptions. We cannot eliminate all assumptions.

Putting forecast errors into perspective is best done using

B. MAPE. MAPE depicts the forecast error relative to what was being forecast.

Which of the following is not typically considered a cure for poor competitiveness?

B. Minimize attention to the operations function. Operations is a prime area for improving competitiveness.

The fact that a few improvements in a few key areas of operations will have more impact than many improvements in many other areas is consistent with the:

B. Pareto phenomenon Pareto phenomena direct our attention to the difference between the "important few" and the "trivial many."

Using the latest observation in a sequence of data to forecast the next period is:

B. a naive forecast. Only one piece of information is needed for a naive forecast.

Forecasting techniques generally assume:

B. continuity of some underlying causal system. Forecasting techniques generally assume that the same underlying causal system that existed in the past will continue to exist in the future.

Which of the following is not among the chief reasons organizations fail?

B. emphasizing labor productivity in labor-intensive environments In labor-intensive environments, emphasizing labor productivity is a good idea.

For firms competing in worldwide markets, conducting ______________ is more complex, since what works in one country or region might not work in another.

B. environmental analysis Environmental analysis takes into account the relevant factors in the environment; there are more of these if there are more markets to consider.

The degree of management involvement in short-range forecasts is:

B. low. Short-range forecasting tends to be fairly routine.

Which of the following is used for constructing a control chart?

B. mean squared error The mean squared error leads to an estimate for the sample forecast standard deviation.

Scheduling personnel is an example of an operations management:

B. operational decision. Staffing-level decisions are made low in the hierarchy.

Manufacturing work sent to other countries is called:

B. outsourced Outsourcing is increasingly a part of operations management.

A managerial approach toward forecasting which seeks to actively influence demand is:

B. proactive. Simply responding to demand is a reactive approach.

The ratio of good output to quantity of raw material input is called

B. process yield. This is sometimes a useful productivity measure in service industries.

The two general approaches to forecasting are:

B. qualitative and quantitative. Forecast approaches are either quantitative or qualitative.

Simple exponential smoothing is being used to forecast demand. The previous forecast of 66 turned out to be four units less than actual demand. The next forecast is 66.6, implying a smoothing constant, alpha, equal to:

C .15 A previous period's forecast error of 4 units would lead to a change in the forecast of 0.6 if alpha equals 0.15.

Given an actual demand of 105, a forecasted value of 97, and an alpha of .4, the simple exponential smoothing forecast for the next period would be:

C. 100.2. Multiply the previous period's forecast error (8) by alpha and then add to the previous period's forecast.

In an assembly operation at a furniture factory, six employees assembled an average of 450 standard dining chairs per five-day week. What is the labor productivity of this operation?

C. 15 chairs/worker/day Divide the output of 450 chairs by the inputs of 30 worker-days.

Given forecast errors of 4, 8, and -3, what is the mean absolute deviation?

C. 5 Convert each error into an absolute value and then average.

Which of the following is not true about systems approach?

C. A systems approach concentrates on efficiency within subsystems. Subsystem efficiency doesn't necessarily translate into overall system efficiency.

Which of the following is true?

C. Functional strategies are shaped by corporate strategy. Corporate strategy shapes strategies at lower levels.

Which of the following features would not generally be considered common to all forecasts?

C. Historical data is available on which to base the forecast. In some forecasting situations historical data are not available.

Moving average forecasting techniques do the following:

C. Smooth variations in the data. Variation is smooth out in moving average forecasts.

Which of the following would be an advantage of using a sales force composite to develop a demand forecast?

C. The sales staff is often aware of customers' future plans. Members of the sales force should be the organization's tightest link with its customers.

A 'product package' consists of:

C. a combination of goods and services Most firms are not pure service or manufacturing firms; they produce combinations of goods and services.

Knowledge skills usually don't include:

C. communication skills Communication skills generally are considered to be people skills.

Detecting nonrandomness in errors can be done using:

C. control charts. Control charts graphically depict the statistical behavior of forecast errors.

The process of comparing outputs to previously established standards to determine if corrective action is needed is called:

C. controlling Controls are used to maintain performance.

The two most important factors in choosing a forecasting technique are:

C. cost and accuracy. More accurate forecasts cost more but may not be worth the additional cost.

For an organization to grow its market share, it must:

C. exceed minimum standards of acceptability for its products or services. Only by exceeding standards can an organization grow its market share.

Years ago in the overnight delivery business, providing package tracking capability gave some firms a competitive advantage. Now, all firms must offer this capability simply to be in this line of business. This is an example of ______________ becoming ____________ over time.

C. order winners; order qualifiers What is an order qualifier and what is an order winner changes over time.

Competitiveness doesn't include:

C. profitability. A company can be competitive relative to similar companies and still be unprofitable if the competitive environment is inherently unprofitable.

Dealing with the fact that certain aspects of any management situation are more important than others is called:

C. recognition of priorities Solutions tend to be targeted toward higher priority aspects of a situation.

Forecasts based on judgment and opinion do not include:

C. second opinions. Second opinions generally refer to medical diagnoses, not demand forecasting.

Which phrase most closely describes the Delphi technique?

C. series of questionnaires The questionnaires are a way of fostering a consensus among divergent perspectives.

Customer service levels can be improved by better:

C. short-term forecast accuracy. More accurate short-term forecasts enable organizations to better accommodate customer requests.

The forecasting method which uses anonymous questionnaires to achieve a consensus forecast is:

C. the Delphi method. Anonymity is important in Delphi efforts.

Suppose a three-period weighted average is being used to forecast demand. Weights for the periods are as follows: wt-3 = 0.2, wt-2 = 0.3 and wt-1 = 0.5. Demand observed in the previous three periods was as follows: At-3 = 2,200, At-2 = 1,950, At-1 = 2,050. What will be the demand forecast for period t?

D. 2050 The forecast for will be (.2 * 2,200) + (.3 * 1,950) + (.5 * 2,050) = 2,050.

Which of the following is a potential shortcoming of using sales force opinions in demand forecasting?

D. Members of the sales force can have difficulty distinguishing between what customers would like to do and what they actually will do. Customers themselves may be unclear regarding what they'd like to do versus what they'll actually do.

A forecast based on the previous forecast plus a percentage of the forecast error is:

D. an exponentially smoothed forecast. Exponential smoothing uses the previous forecast error to shape the next forecast.

Which technique is used in computing seasonal relatives?

D. centered moving average The centered moving average serves as the basis point for computing seasonal relatives.

Unique attributes of firms that give them a competitive edge are called:

D. core competencies. Core competencies can be translated into competitive advantage.

Minimizing the sum of the squared deviations around the line is called:

D. least squares estimation. Least squares estimations minimize the sum of squared deviations around the estimated regression function.

Which of the following is not necessarily an element of a good forecast?

D. low cost A good forecast can be quite costly if necessary.

The fundamental purpose for the existence of any organization is described by its:

D. mission statement. A mission statement is the organization's attempt to justify its existence.

Productivity is expressed as:

D. output divided by input. Productivity is the ratio of outputs to inputs.

Increasing the service offered to the customer makes it more difficult to compete on the basis of:

D. price. More extensive service can be more costly, and more costly outputs make price-based strategies more difficult.

Which is not a characteristic of simple moving averages applied to time series data?

D. requires only last period's forecast and actual data Simple moving averages can require several periods of data.

Where a firm locates would typically not affect that firm's:

D. strategy. Typically, strategy dictates where firms will locate, rather than location dictating strategy.

Which of the following is not a reason for poor performance of our organization in the marketplace?

D. taking advantage of strengths/opportunities, and recognizing competitive threats Taking advantage of strengths/opportunities and recognizing competitive threats would enable good performance.

Gradual, long-term movement in time series data is called:

D. trend Trends move the time series in a long-term direction.

Which of the following possible values of alpha would cause exponential smoothing to respond the most quickly to forecast errors?

E. .15 Larger values for alpha correspond with greater responsiveness.

The president of State University wants to forecast student enrollments for this academic year based on the following historical data. What is the forecast for this year using the least squares trend line for these data?

E. 22,800 Treat 5 years ago as period 0.

__________ is generally used to facilitate an organization strategy that emphasizes low cost.

E. Standardization Standardization is a powerful means of achieving low-cost production.

Which of these factors would be least likely to affect productivity?

E. advertising Advertising could increase the value of the outputs, but it is less likely to affect productivity than these other factors.

Which of the following is not a type of operations?

E. all the above involve operations All of these involve taking inputs and transforming them.

Which of the following is not a key step toward improving productivity?

E. converting bond debt to stock ownership A firm's productivity is independent of its capital structure.

When choosing a forecasting technique, a critical trade-off that must be considered is that between:

E. cost and accuracy. The trade-off between cost and accuracy is the critical consideration when choosing a forecasting technique.

Which of the following is/are a primary input into capacity, sales, and production planning?

E. demand forecasts Demand forecasts are direct inputs into capacity, sales, and production plans.

Time-based approaches of business organizations focus on reducing the time to accomplish certain necessary activities. Time reductions seldom apply to:

E. internal audits. Internal audits have little to do with core value-adding efforts.

An organization's mission statement serves as the basis for:

E. organizational goals. Organizations' missions serve as the broad underpinning for their goals.

Value added can be calculated by:

E. outputs minus inputs. Value added represents the change in value of the original inputs.

Which term most closely relates to associative forecasting techniques?

E. predictor variables Associative techniques use predictor variables.

Which of the following is not a factor that affects productivity?

E. product price These don't lead to fundamental changes in operations.

Core competencies in organizations generally do not relate to:

E. sales price. What a firm charges for its outputs is not a core competency. What it can charge, however, is potentially related to a core competency.

Which of the following is not a key factor of competitiveness?

E. size of organization Competitiveness often has nothing to do with organization size.

Which of the following is not a type of judgmental forecasting?

E. time series analysis Time series analysis is a quantitative approach.