OTM Final Review MC

A company estimates from its past demand data that the seasonality index for the summer season is 1.5. What does this mean? A. Demand is higher than average in the summer. B. Demand is lower than average in the summer. C. Demand is the same in the summer as in other seasons. D. Cannot tell.

A

The EOQ model captures the tradeoff between which two costs? A. Purchasing cost and holding cost. B. Ordering cost and holding cost. C. Purchasing cost and ordering cost. D. Stockout cost and holding cost.

B

The manager of the local grocery store observes that demand for beer always surges on Fridays, as people get ready for partying over the weekend. This is an example of which component of demand? A. trend B. seasonality C. cycle D. randomness

B

When creating a time series-based forecast for the amount of soda to be sold in the cafeteria next week, which data sources do you include in your forecasting process? A. the opinion of the principal B. old demand data C. the age of the cafeteria worker

B

United airlines has started selling the air tickets for the flight 895 from Chicago to Hong Kong on September 30. There are 250 economy class seats on board. The airline sells some economy class seats at a discount price of $440 and reserve a number of seats to sell at the fully price of $770. Suppose that United Airline can always sell all discount tickets, and the demand for full price tickets is normally distributed with a mean of 100 and a standard deviation of 25. Applying the newsvendor model, what is the critical ratio? (5 decimals)

0.42857

A store has the following demand figures for the last four years: Year and Demand 1- 100 2- 150 3- 98 4- 112 What is the exponential smoothing forecast for year 5? Use alpha = 0.3 and a forecast for year 4 of 100. Round your answer to one decimal.

103.6

In Question 5, suppose each Crate & Barrel store holds its own inventory onsite. The stores follow an "order-up-to" policy with L+P = 1 week. How much safety stock is needed at each store to ensure a service level of 85%? (round to the nearest integer)

104

A supermarket's annual sales is $95,751, and its annual cost of goods sold is $76,858. Its average inventory is $6244. What is this supermarket's annual turnover rate? Round your answer to the nearest number.

12

In Question 5, suppose the 3 Crate & Barrel stores do not hold any inventory on site and instead get their inventory from the same centralized warehouse in LA. The centralized warehouse follows an "order-up-to" policy with L+P=1 week. How much safety stock is needed at the centralized warehouse to ensure a service level of 85%? (round to the nearest integer)

180

A firm's demand is 1200 units per year. If the firm orders 400 units per order, how many orders does the firm make per year on average?

3

A police station had to deploy a police officer for an emergency multiple times in the last four evenings. The table below shows the number of emergencies each evening. Monday-6 Tuesday-6 Wednesday-8 Thursday-10 What would be their forecast for the emergencies on Friday using a two-day moving average approach?

9

United airlines has started selling the air tickets for the flight 895 from Chicago to Hong Kong on September 30. There are 250 economy class seats on board. The airline sells some economy class seats at a discount price of $440 and reserve a number of seats to sell at the fully price of $770. Suppose that United Airline can always sell all discount tickets, and the demand for full price tickets is normally distributed with a mean of 100 and a standard deviation of 25. What is the optimal protection level for the airline? (nearest answer)

96

A company sells two products, product A and product B. It is estimated that the coefficient of variation in demand for product A is 3, while the coefficient of variation in demand for product B is 1. Which of the following statements is true? A. Demand for product A is more uncertain than demand for product B. B. Demand for product A is less uncertain than demand for product B. C. Demand for product A is just as uncertain as demand for product B. D. We can't tell whether demand for product A is more or less uncertain than demand for product B.

A

A focus on improving the efficiency of the supply chain would be best matched with a product that is _____________ A. Functional B. Innovative C. Reactive D. Speculative E. Responsive

A

Culver's has been using two different forecasting methods to forecast its sales of chicken fingers: Method 1 and Method 2. Below are the Mean Absolute Errors (MAEs) and Average Errors of the two methods. MAE: Method 1=30; Method 2=10 Average Error: Method 1=-20; Method 2=-20 What can you say about the two forecasting methods in terms of the direction of forecasting error? A. Both methods tend to under-estimate demand. B. Both methods tend to over-estimate demand. C. Method 1 tends to over-estimate demand, and Method 2 tends to under-estimate demand. D. Method 1 tends to under-estimate demand, and Method 2 tends to over-estimate demand.

A

In making Buy-Make decisions, which components should be made in-house? A. A component that represents the company's core competency B. A component that is highly standardized and a common commodity C.A component that requires technical expertise that the company does not have

A

In risk based production sequencing associated with the quick response system, which of the following statements is true? A. The firm should produce safe products first and risky products later. B. The firm should produce risky products first and safe products later. C. The firm should produce both risky and safe products at the same time.

A

In the beer game, the goal of each player's role is to keep his/her total costs as low as possible. What constitutes this total cost? A. Inventory cost and backlog cost. B. Inventory cost and storage cost. C. Backlog cost and investment cost. D. Ordering cost and inventory cost.

A

Jerry sells ice cream at the local park. Every day, he needs to decide how many ice cream cones to bring with him. After some calculations, he found that to maximize his daily expected profit, he would need to bring 240 cones with him. This corresponds to a critical ratio of 0.85. However, Jerry is also mindful that the local community depends on him for refreshments, so he wants to ensure a service level of at least 70%. How many cones should he bring with him? A. 240. B. More than 240. C. Fewer than 240. D. Cannot be determined.

A

Product A's annual inventory turnover rate is 10 and product B's annual turnover rate is 15. Which product spends more time in inventory on average? A. A B. B C. Cannot be determined (could be either one)

A

What are the possible consequences for a firm if its customer experiences a stockout? A. Loss of profit and loss of customer good will B. Loss of profit only C. Loss of customer good will only D. None of the above

A

What is a key characteristic of products sold at Department Stores like Khol's? A. Seasonal sales cycles B. Obsolescence C. Predictable demand D. Refrigeration

A

Demand each period is normally distributed and an order-up-to model is used to decide order quantities. Which of the following influences the chosen order-up-to level (i.e., a change in which of the following would change the chosen order-up-to level)? I. The mean of demand in one period. II. The standard deviation of demand over (L+P) periods. III. The target in-stock probability. Which ones are true?

All

Which of the following are reasons for the bullwhip effect? I. Overreactive Ordering II. Batching III. Price Promotions

All

Which of the following options are involved in supporting an omnichannel strategy? I) In-store (bricks and mortar) II) Buy online, pickup in store III) Ship to home IV) Vendor ship to home

All

A manufacturer might delay the final stages of production for a product with high variety until orders are actually received in order to better match supply with demand without resorting to excessive inventories. This approach is known as A. Procrastination B. Postponement C. Transshipment D. Evolving supply E. Inventory buffering

B

According to the guest lecturer, in supply chain logistics, what is the next important step after products arrive at the port of entry? A. Sending the products to domestic vendors. B. Deconsolidation and sending the products to distribution centers. C. Sending the products to retail stores directly. D. Deconsolidation and sending the products to consumers.

B

Culver's has been using two different forecasting methods to forecast its sales of chicken fingers: Method 1 and Method 2. Below are the Mean Absolute Errors (MAEs) and Average Errors of the two methods. MAE: Method 1=30; Method 2=10 Average Error: Method 1=-20; Method 2=-20 What can you say about the two forecasting methods in terms of the magnitude of forecasting error? A. The two methods have similar magnitudes of error. B. The magnitude of error is larger in Method 1 than in Method 2. C. The magnitude of error is larger in Method 2 than in Method 1.

B

Demand in each period follows the same normal distribution, with mean mu and standard deviation sigma. Assuming demand is independent across periods, which of the following statements about the standard deviation of demand over five periods is true? A. It equals sigma. B. It is greater than sigma but less than 5*sigma. C. It equals 5*sigma. D. It is even more than 5*sigma.

B

For a company that wishes to reduce its carbon footprint, which of the following transportation modes is preferred? A. Truck B. Train C. Plane

B

It is costly to hold inventory, but inventory can also be useful in a process because A. adding inventory to a process will shorten the average time a unit spends in a process B. adding inventory to a process can help with hedging against demand uncertainty C. adding inventory to a process is likely to increase quality D. adding inventory to a process will increase the profit margin of the item.

B

The EOQ minimizes the sum of the ordering cost, the purchasing cost, and which of the following costs? A. Stockout cost B. Holding cost C. Quality cost D. Transportation cost

B

When using the simple exponential smoothing forecasting method, which of the following is the major reason to use a = 0.1 rather than a = 0.5? A. if the demand of the product is seasonal B. if the demand of the product is highly fluctuating with no discernable reason C. if the demand of the product has a decreasing trend D. if the demand of the product is experiencing growth

B

Which of the following retailers is most focused on moving in bulk and moving efficiently in the supply chain? A. Home Depot B. Amazon C. Best Buy D. Macy's

B

A firm manages its inventory with an order-up-to level (i.e., a base stock level). The review period is one day (so the manager makes an order every day), the lead time is two days, and the order-up-to level is 10. Suppose its inventory position at the start of a day (before it submits an order for that day) is -4. Which of the following statements is definitely true? A. Demand was four units yesterday. B. Demand was 10 units yesterday. C. The firm manager should order 14 units today. D. The firm manager should order 10 units today

C

Ms. Green runs a newstand that sells the NYTimes. She purchases the newspaper from the publisher at $0.40 per copy. She sells the newspaper to customers at $1.20 per copy. Any leftover newspaper can be sold to the recycler at the end of the day for $0.10. What are the underage cost and overage cost in this problem? A. The underage cost is 1.10 and the overage cost is 0.30. B. The underage cost is 0.30 and the overage cost is 0.80. C. The underage cost is 0.80 and the overage cost is 0.30. D. None of the above.

C

There are three Crate & Barrel stores in Los Angeles. The weekly demand for sofas at each store is normally distributed with mean 500 and standard deviation 100. Demand is independent across stores. What is the total demand for Crate & Barrel sofas in LA? A. Normally distributed with mean 1500 and standard deviation 300. B. Normally distributed with mean 1500 and a standard deviation greater than 300. C. Normally distributed with mean 1500 and a standard deviation less than 300. D. None of the above.

C

What is the definition of a forecast error? A. The average difference between the forecast and the actual outcome B. The maximum difference between the forecast and the actual outcome C. The difference between the forecast and the actual outcome D. The percentage difference between the forecast and the actual outcome

C

Which of the following are likely to be symptoms of the bullwhip effect in a supply chain comprised of consumers, a retailer, a wholesaler, and a factory? A. I. Variability of orders from the retailer to the wholesaler is higher than variability of orders from the wholesaler to the factory. B. II. Variability of orders from the wholesaler to the factory is lower than the variability in consumer demand to the retailer. C. III. Variability in consumer demand is lower than the variability of orders from the retailer to the wholesaler.

C

Which of the following products is NOT a perishable product? A. Newspapers B. Fresh Croissants C. Rulers D. Christmas Trees

C

Which of the following questions is addressed by mass customization? A. Where do we hold inventory? B. In what form do we hold inventory? C. What products do we offer customers?

C

A functional product has which of the following features (compared to innovative products)? I) Unpredictable demand II) Shorter product life cycle III) Low profit margin IV) Lower product variety. V) More likely stockout. A. I only B. II only C. IV only D. III and IV only E. III, IV, and V only

D

Adam would like to maximize his expected profit from selling product X. He calculates that the critical ratio for product X is 0.45. Which of the following statements is FALSE? A. Adam should choose the order quantity that achieves an in-stock probability of 45%. B. If Adam chooses the optimal order quantity, then the service level is 45%. C. If demand uncertainty increases, then Adam should stock fewer units of product X. D. None of the above

D

Elon Musk, the CEO of SpaceX, is trying to forecast the demand for tickets to Mars. Which forecasting method should he use? A. Exponential smoothing B. Time series forecasting C. Linear regression analysis D. Market research

D

If a firm wanted to reduce the EOQ quantity by a factor of 2, how would the demand have to change? A. Double. B. Remain unchanged. C. Reduce by a factor of 2. D. Reduce by a factor of 4.

D

In the SnowTime example we covered in Class 4, which of the following statements is FALSE? A. The company introduces new designs every year, and leftover inventory from previous years are heavily discounted. B. The production timeline is long relative to the selling period, so the company does not have replenishment opportunities. C. The company makes the ordering decision based on the inventory costs as well as the demand forecast. D. Any jacket that is not sold this year can be sold at the same price next year.

D

The "quick response" approach involves which of the following? A. a. Calculating target in-stock probability using long-term inventory control policies. B. b. Updating item forecast using early season sales figures C. c. Placing a replenishment order after observing some demand data. D. b and c only E. a, b, and c.

D

Which of the following is a disadvantage of location pooling? A. It increases in-stock probability B. It decreases on-hand inventory C. It decreases demand variability D. It increases transportation (delivery) cost

D

Which of the following is a key impact of the location-pooling strategy? A. Reducing the in-stock probability B. Increasing demand variability C. Reducing on-order inventory D. Reducing safety stock while achieving the same service level

D

Which of the following is an example of an innovative product? A. White socks B. Toothpaste C. Campbell soup D. Trendy clothes E. None of the above

D

Which of the following is an example of direct segmentation? A. Amazon charges a fee for 2-day delivery. B. Conference registration fees are cheaper if you register early. C. Flight tickets that cannot be refunded are cheaper. D. Topshop offers a 10% discount to college students.

D

Sorlini Pasta sells pasta throughout Italy. Which of the following is the strongest evidence that Sorlini Pasta is suffering from the bullwhip effect? A. They hold a considerable amount of inventory, enough to satisfy their average demand for the next four weeks. B. Just before a snowstorm in the northern part of the country, sales of pasta increased considerably. C. Sorlini sells both fresh and dry pasta products through different types of retailers. D. Most retailers only carry a subset of all of the pastas Sorlini offers. E. The volatility of the orders Sorlini receives from its distributors is greater than the volatility of pasta demand at retailers. F. Pasta consumption per capita in southern Italy is higher than in northern Italy.

E

What are the possible costs to an airline for overbooked passengers? A. I) Direct cost of compensation B. II) Travel arrangement cost C. III) The ill-will cost D. Only I and II. E. I, II, and III.

E

Which of the following statements is FALSE about practicing price differentiation (discrimination)? A. Customers may think it is unfair B. Some companies implement price differentiation online C. Cannibalization is a major challenge when implementing price differentiation. D. Selling discounted air tickets three months before the flight date represents a form of price differentiation. E. None of the above; all statements are true.

E

You follow an (r, Q) policy with re-order point r=100 units. Currently, you have 40 on-hand inventory, no backorders, and on-order inventory of 80. Did you forget to place an order? Yes No

No