SCM FINAL EXAM

1) Delta uses mathematical short-term scheduling techniques and a high-tech nerve center to manage the rapid rescheduling necessary to cope with weather delays and similar disruptions.

t

1) If 100 units of Q are needed and 10 are already in stock, then the gross requirement is 100 and the net requirement is 90.

t

1) The lot-for-lot lot-sizing technique is particularly appropriate when demand is not very smooth and set up cost is small compared to holding cost.

t

2) In services, the scheduling emphasis is usually on staffing levels, not material

t

2) One criterion for developing effective schedules is minimizing completion time.

t

DRP is a time-phased stock-replenishment plan for all levels of a distribution network.

t

Graphical techniques are easy to understand and use, but are not well-suited for generating optimal strategies.

t

The strategies of aggregate planning are broadly divided into demand options and capacity options.

t

3) One of the four things needed for aggregate planning is a logical overall unit for measuring sales and output

true

The transportation method of linear programming is an optimizing approach to aggregate planning.

true

14) A certain type of computer costs $1,000, and the annual holding cost is 25% of the value of the item. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity? A) 16 B) 70 C) 110 D) 183 E) 600

110

10) Which of the following dispatching rules ordinarily gives the best results when the criterion is lowest time for completion of the full sequence of jobs? A) shortest processing time (SPT) B) critical ratio (CR) C) first in, first out (FIFO) D) first come, first served (FCFS) E) longest processing time (LPT)

a

2) The fixed-period inventory system requires more safety stock than a fixed-quantity system because: A) a stockout can occur during the review period as well as during the lead time. B) this model is used for products that have large standard deviations of demand. C) this model is used for products that require very high service levels. D) replenishment is not instantaneous. E) setup costs and holding costs are large.

a

20) What is the priority rule that sequences jobs using the smallest ratio of due date from today to processing time? A) critical ratio B) earliest due date C) first come, first served D) longest processing time E) shortest processing time

a

4) A specific product has demand during lead time of 100 units, with a standard deviation during lead time of 25 units. What safety stock (approximately) provides a 95% service level? A) 41 B) 55 C) 133 D) 140 E) 165

a

4) Under which of the following do planning tasks associated with job assignments, ordering, job scheduling, and dispatching typically fall? A) short-range plans B) intermediate-range plans C) long-range plans D) mission-related planning E) strategic planning

a

4) Which of the following lot-sizing techniques results in the lowest holding costs? A) lot-for-lot B) EOQ C) POQ D) Wagner-Whitin algorithm E) the quantity discount model

a

5) The correct sequence from longest to smallest duration scheduling is: A) capacity planning, aggregate planning, master schedule, short-term scheduling. B) aggregate planning, capacity planning, master schedule, short-term scheduling. C) master schedule, capacity planning, aggregate planning, short-term scheduling. D) master schedule, aggregate planning, capacity planning, short-term scheduling. E) capacity planning, master schedule, aggregate planning, short-term scheduling.

a

7) What directly results from disaggregation of an aggregate plan? A) a master production schedule B) priority scheduling C) a transportation matrix D) a capacity-demand matrix E) detailed work schedules

a

9) What is a scheduling technique used to achieve an optimum, one-to-one matching of tasks and resources? A) the assignment method B) Johnson's rule C) the CDS algorithm D) the appointment method E) the reservation method

a

1) Which of the following is NOT required to be known in order to schedule process-focused facilities? A) the sequence of work B) which workers are assigned to each work center C) the time required for each item D) the capacity of each work center E) the availability of each work center

b

10) ABC analysis is based upon the principle that: A) all items in inventory must be monitored very closely. B) there are usually a few critical items, and many items that are less critical. C) an item is critical if its usage is high. D) more time should be spent on class "C" items because there are many more of them. E) as with grade distributions in many MBA courses, there should be more medium-level "B" items than either "A" or "C" items.

b

12) Cycle counting: A) is a process by which inventory records are verified once a year. B) eliminates annual inventory adjustments. C) provides a measure of inventory turnover. D) assumes that all inventory records must be verified with the same frequency. E) assumes that the most frequently used items must be counted more frequently.

b

13) Dependence on an external source of supply is found in which of the following aggregate planning strategies? A) varying production rates through overtime or idle time B) subcontracting C) using part-time workers D) back ordering during high demand periods E) hiring and laying off

b

15) In the service sector, which of the following aggregate planning strategies might direct your client to a competitor? A) using part-time workers B) subcontracting C) changing inventory level D) varying production rates through overtime or idle time E) varying work force size by hiring or layoffs

b

15) Which of the following dispatching rules tends to minimize job flow time? A) FCFS: first come, first served B) SPT: shortest processing time C) EDD: earliest due date D) LPT: longest processing time E) FCLS: first come, last served

b

23) Which choice below best describes the counterseasonal product demand option? A) producing such products as lawnmowers and sunglasses during the winter B) developing a mix of products that smoothes out their demands C) lowering prices when demand is slack D) using subcontractors only when demand is excessive E) the breaking of the aggregate plan into finer levels of detail

b

3) Distribution resource planning (DRP) is: A) a transportation plan to ship materials to warehouses. B) a time-phased stock replenishment plan for all levels of a distribution network. C) a shipping plan from a central warehouse to retail warehouses. D) material requirements planning with a feedback loop from distribution centers. E) a material requirements planning package used exclusively by warehouses.

b

5) Industries in which revenue management techniques are easiest to apply are those where: A) use tends to be predictable, and pricing tends to be fixed. B) use tends to be predictable, and pricing tends to be variable. C) use tends to be uncertain, and pricing tends to be fixed. D) use tends to be uncertain, and pricing tends to be variable.

b

5) Under which of the following do planning tasks associated with production planning and budgeting, as well as setting employment, inventory, and subcontracting levels, typically fall? A) short-range plans B) intermediate-range plans C) long-range plans D) demand options E) strategic planning

b

6) Forward scheduling is the scheduling of: A) the end items or finished products. B) jobs as soon as the requirements are known. C) the start items or component parts. D) the final operation first beginning with the due date. E) jobs according to their profit contributions.

b

6) To use revenue management strategies, a business should have which combination of costs? A) high variable and high fixed B) low variable and high fixed C) high variable and low fixed D) low variable and low fixed E) either A or B

b

7) A manager is applying the transportation model of linear programming to solve an aggregate planning problem. Demand in period 1 is 100 units, and in period 2, demand is 150 units. The manager has 125 hours of regular employment available for $10/hour each period. In addition, 50 hours of overtime are available for $15/hour each period. If holding costs are $2 per unit each period, how many hours of regular employment should be used in period 1? (Assume demand must be met in both periods 1 and 2 for the lowest possible cost and that production is 1 unit per hour.) A) 100 B) 125 C) 150 D) 50 E) none of the above

b

8) An advantage of the fixed-period inventory system is that: A) safety stock will be lower than it would be under a fixed-quantity inventory system. B) there is no physical count of inventory items when an item is withdrawn. C) no inventory records are required. D) orders usually are for smaller order quantities. E) the average inventory level is reduced.

b

8) Which of the following statements regarding lot-sizing is TRUE? A) EOQ principles should be followed whenever economical. B) Too much concern with lot-sizing results in false accuracy. C) Lot-for-lot cannot be modified for scrap allowance or process constraints. D) The Wagner-Whitin algorithm simplifies lot size calculations. E) All of the above are true.

b

10) If daily demand is constant at 10 units per day, and lead time averages 12 days with a standard deviation of 3 days, 95 percent service requires how much safety stock? A) 28 units B) 30 units C) 49 units D) 59 units E) 114 units

c

10) The two most basic inventory questions answered by the typical inventory model are: A) timing of orders and cost of orders. B) order quantity and cost of orders. C) timing of orders and order quantity. D) order quantity and service level. E) ordering cost and carrying cost.

c

11) In a safety stock problem where both demand and lead time are variable, demand averages 150 units per day with a daily standard deviation of 16, and lead time averages 5 days with a standard deviation of 1 day. What is the standard deviation of demand during lead time? A) 15 units B) 100 units C) 154 units D) 500 units E) 13,125 units

c

11) The short-term scheduling activity called "loading": A) assigns dates to specific jobs or operations steps. B) specifies the order in which jobs should be done at each center. C) assigns jobs to work centers D) assigns workers to jobs. E) assigns workers to machines.

c

12) Which MRP lot-sizing technique should be considered to be the goal (i.e., the technique of choice under ideal conditions)? A) Wagner-Whitin B) EOQ C) lot-for-lot D) POQ E) Silver-Meal

c

12) Which of the following is an aid used to monitor jobs in progress? A) a Gantt load chart B) the assignment method C) a Gantt schedule chart D) Johnson's rule E) a Gantt progress chart

c

13) If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand: Q* = A) is smaller than the holding cost per unit. B) is zero. C) is one-half of the economic order quantity. D) is affected by the amount of product cost. E) goes down if the holding cost per unit goes down.

c

13) Which of the following statements regarding control of service inventories is TRUE? A) Service inventory is a fictional concept, because services are intangible. B) Service inventory needs no safety stock, because there's no such thing as a service stockout. C) Effective control of all goods leaving the facility is one applicable technique. D) Service inventory has carrying costs but no setup costs. E) Good personnel selection, training, and discipline are easy.

c

16) Average completion time for a schedule sequence at a work center is the ratio of: A) total processing time to the number of jobs. B) total flow time to total processing time. C) total flow time to the number of jobs. D) total processing time plus total late time to the number of jobs. E) total flow time plus total late time to the number of jobs.

c

17) In the basic EOQ model, if D = 6000 per year, S = $100, and holding cost = $5 per unit per month, what is the economic order quantity? A) 24 B) 100 C) 141 D) 490 E) 600

c

19) Which critical ratio value implies that a job is already late? A) more than 100 B) 1 C) less than 1 D) 10 E) 3.4

c

19) Which of the following aggregate planning options is NOT associated with manipulation of product or service demand? A) price cuts or discounts B) promotion C) subcontracting D) counterseasonal products or services E) advertising

c

2) Which of the following characteristics makes revenue management UNATTRACTIVE to organizations that have perishable inventory? A) demand can be segmented B) service can be sold in advance of consumption C) capacity is easily changed D) variable costs are low and fixed costs are high E) demand fluctuates

c

27) In level scheduling, what is kept uniform from month to month? A) product mix B) inventory levels C) production/workforce levels D) demand levels E) sub-contracting levels

c

3) A firm practices a pure chase strategy. Production last quarter was 1000. Demand over the next four quarters is estimated to be 900, 700, 1000, and 1000. Hiring cost is $20 per unit, and layoff cost is $5 per unit. Over the next year, what will be the sum of hiring and layoff costs? A) $500 B) $2,500 C) $7,500 D) $7,000 E) $12,500

c

3) Frito-Lay uses aggregate planning to match capacity with demand because of the ________ associated with its specialized processes. A) high variable cost and high fixed cost B) high variable cost and low fixed cost C) low variable cost and high fixed cost D) low variable cost and low fixed cost E) none of the above

c

30) Which of the following is NOT an advantage of level scheduling? A) stable employment B) lower absenteeism C) matching production exactly with sales D) lower turnover E) more employee commitment

c

4) What is the process of tracing upward in the bill of material from the component to the parent item in order to determine the cause for the component requirement? A) net requirements planning B) time fencing C) pegging D) backtracking E) leveling

c

4) Which of the following is FALSE concerning enterprise resource planning (ERP)? A) It attempts to automate and integrate the majority of business processes. B) It shares common data and practices across the enterprise. C) It is inexpensive to implement. D) It provides and accesses information in a real-time environment. E) ERP software promises reduced transaction costs.

c

2) A recent advance in short-term scheduling that makes use of expert systems and simulation in solving dynamic scheduling problems is: A) forward scheduling. B) backward scheduling. C) infinite scheduling. D) finite capacity scheduling. E) progressive scheduling.

d

5) A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its intermediate period), it estimates the sum of demands to be 105,000 units. The firm has 250 production days per year. In January, which has 22 production days, demand is estimated to be 11,000 units. A graph of demand versus level production will show that: A) the January requirement is below level production of 420 units. B) level production is approximately 1000 units per day. C) level production of 420 units per day is below the January requirement. D) level production is approximately 420 units per month. E) the firm must hire workers between December and January.

c

5) If a load report (resource requirements profile) shows a work center scheduled beyond capacity: A) the company must add capacity by enlarging the facility. B) the company must add capacity by such tactics as overtime and subcontracting. C) the work center's load may be smoothed by such tactics as operations splitting or lot splitting. D) the aggregate plan must be revised. E) the Wagner-Whitin algorithm should be used to rebalance the load.

c

6) MRP II is accurately described as: A) MRP software designed for services. B) MRP with a new set of computer programs that execute on microcomputers. C) material resource planning. D) an enhancement of MRP that plans for all levels of the supply chain. E) a new generation of MRP software that extends MRP to planning and scheduling functions.

c

6) What is one of the tools that is particularly useful in reducing system nervousness in an MRP system? A) modular bills B) time phasing C) time fences D) lot sizing E) closed loop system

c

6) Which of the following is NOT one of the four things needed for aggregate planning? A) a logical overall unit for measuring sales and output B) a method to determine the relevant costs C) a mathematical model that will minimize costs over the intermediate planning period D) an aggregate demand forecast for an intermediate planning period E) All of these are needed for aggregate planning.

c

9) If daily demand is normally distributed with a mean of 15 and standard deviation of 5, and lead time is constant at 4 days, a 90 percent service level will require how much safety stock? A) 7 units B) 10 units C) 13 units D) 16 units E) 26 units

c

11) Which of the following is NOT an assumption of the economic order quantity model shown below? Q* = A) Demand is known, constant, and independent. B) Lead time is known and constant. C) Quantity discounts are not possible. D) Production and use can occur simultaneously. E) The only variable costs are setup cost and holding (or carrying) cost. Answer: D

d

12) What is the primary purpose of the basic economic order quantity model shown below? Q* = A) to calculate the reorder point, so that replenishments take place at the proper time B) to minimize the sum of carrying cost and holding cost C) to maximize the customer service level D) to minimize the sum of setup cost and holding cost E) to calculate the optimum safety stock

d

19) Which of the following statements about the basic EOQ model is FALSE? A) If the setup cost were to decrease, the EOQ would fall. B) If annual demand were to double, the number of orders per year would increase. C) If the ordering cost were to increase, the EOQ would rise. D) If annual demand were to double, the EOQ would also double. E) All of the above statements are true.

d

25) Which choice best describes level scheduling? A) Daily production is variable from period to period. B) Subcontracting, hiring, and layoffs manipulate supply. C) Price points are calculated to match demand to capacity. D) Inventory goes up or down to buffer the difference between demand and production. E) Overtime is used to handle seasonal demand fluctuations.

d

28) Which of the following is NOT consistent with level scheduling? A) varying the use of subcontracting B) finding alternative work for employees during low-demand periods C) using built-up inventory to meet demand requirements D) varying production levels and/or work force to meet demand requirements E) All of the above are inconsistent with the pure level strategy.

d

28) Which of these statements about the production order quantity model is FALSE? A) The production order quantity model is appropriate when the assumptions of the basic EOQ model are met, except that receipt is noninstantaneous. B) Because receipt is noninstantaneous, some units are used immediately and not stored in inventory. C) Average inventory is less than one-half of the production order quantity. D) All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity. E) None of the above is false.

d

3) Enterprise resource planning (ERP): A) seldom requires software upgrade or enhancement. B) does not integrate well with functional areas other than operations. C) is inexpensive to implement. D) automates and integrates the majority of business processes. E) all of the above

d

31) A firm uses the pure chase strategy of aggregate planning. It produced 1000 units in the last period. Demand in the next period is estimated at 800, and demand over the next six periods (its aggregate planning horizon) is estimated to average 900 units. Which of the following tactics would be most representative of following a chase strategy? A) add 100 units to inventory in the next period B) add 200 units to inventory in the next period C) hire workers to match the 100-unit difference D) lay off workers to match the 200-unit difference E) implement a lower price point to increase demand

d

32) Which of the following statements about quantity discounts is FALSE? A) The cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs. B) In inventory management, item cost becomes relevant to order quantity decisions when a quantity discount is available. C) If carrying costs are expressed as a percentage of value, EOQ is larger at each lower price in the discount schedule. D) The larger the annual demand, the less attractive a discount schedule will be. E) The smaller the ordering cost, the less attractive a discount schedule will be.

d

4) "An optimal plan for minimizing the cost of allocating capacity to meet demand over several planning periods" best describes which of the following? A) the linear decision rule B) simulation C) the management coefficients model D) the transportation method E) graphical methods

d

4) Revenue (or yield) management is best described as: A) a situation where management yields to labor demands. B) a situation where the labor union yields to management demands. C) a process designed to increase the rate of output. D) allocation of scarce resources to customers at prices that will maximize revenue. E) management's selection of a product mix yielding maximum profits.

d

6) The purpose of safety stock is to: A) replace failed units with good ones. B) eliminate the possibility of a stockout. C) eliminate the likelihood of a stockout due to erroneous inventory tally. D) control the likelihood of a stockout due to variable demand and/or lead time. E) protect the firm from a sudden decrease in demand.

d

7) Short-term schedules are prepared: A) directly from the aggregate plans. B) directly from the capacity plans. C) from inventory records for items that have been used up. D) from master schedules, which are derived from aggregate plans. E) from the purchasing plans.

d

8) Demand for a given item is said to be dependent if: A) it originates from the external customer. B) there is a deep bill of material. C) the finished products are mostly services (rather than goods). D) there is a clearly identifiable parent. E) the item has several children.

d

8) If demand is not uniform and constant, then stockout risks can be controlled by: A) increasing the EOQ. B) spreading annual demand over more frequent, but smaller, orders. C) raising the selling price to reduce demand. D) adding safety stock. E) reducing the reorder point.

d

8) Which of the following statements about ABC analysis is FALSE? A) ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings. B) In ABC analysis, "A" items should have tighter physical inventory control than "B" or "C" items have. C) In ABC analysis, forecasting methods for "C" items may be less sophisticated than for "A" items. D) ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. E) Criteria other than annual dollar volume, such as high holding cost or delivery problems, can determine item classification in ABC analysis

d

9) Which of the following is NOT one of the four main types of inventory? A) raw material inventory B) work-in-process inventory C) maintenance/repair/operating supply inventory D) safety stock inventory E) finished-goods inventory

d

3) Which of the following is an element of inventory holding costs? A) housing costs B) material handling costs C) investment costs D) pilferage, scrap, and obsolescence E) All of the above are elements of inventory holding costs.

e

4) What is the difference between P and Q inventory systems? A) order size B) order spacing C) maximum service level D) lead time length E) A and B

e

11) ABC analysis divides on-hand inventory into three classes, generally based upon which of the following? A) item quality B) unit price C) the number of units on hand D) annual demand E) annual dollar volume

e

29) Which of the following is consistent with a pure chase strategy? A) vary production levels to meet demand requirements B) vary work force to meet demand requirements C) vary production levels and work force to meet demand requirements D) little or no use of inventory to meet demand requirements

e

4) Which of the following statements regarding aggregate planning in services is FALSE? A) Approaches to aggregate planning differ by the type of service provided. B) Some service organizations conduct aggregate planning in exactly the same way as manufacturing firms, but with demand management taking a more active role. C) Aggregate planning in some service industries may be easier than in manufacturing. D) Labor is the primary aggregate planning vehicle. E) Level scheduling is far more common than using a chase strategy.

e

4) Which of the following statements regarding scheduling at Delta Airlines is FALSE? A) About one flight in twenty is disrupted by weather events. B) Schedule changes at one airport have a ripple effect that may have impacts in many others. C) Delta's high-tech computer and communications system is located in Atlanta. D) Delta's rapid rescheduling uses mathematical scheduling models. E) Delta's rapid rescheduling promotes air safety and limits traveler inconvenience, but has not resulted in money savings for Delta

e

5) Aggregate planning for service firms that provide intangible output deals mainly with: A) smoothing the production rate and finding the optimal size of the workforce. B) capital investment decisions. C) centralized purchasing. D) centralized production. E) planning for human resource requirements and managing demand.

e

5) Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be? A) about 18 B) about 24 C) about 32 D) about 38 E) more than 40

e

5) Service level is: A) the probability of stocking out. B) the probability of not stocking out. C) something that should be minimized in retail. D) calculated as the cost of a shortage divided by (the cost of shortage + the cost of overage) for single-period models. E) B and D

e

7) Which of the following should be higher in P systems than Q systems? A) lead time B) demand C) order size D) order spacing E) safety stock

e

7) Which of the following would most likely fall under the scope of only an operations manager? A) research and development B) new product plans C) capital investments D) facility location/capacity E) setting inventory levels

e

8) Which of the following is not an effectiveness criterion for scheduling? A) minimizing customer waiting time B) minimizing completion time C) minimizing WIP inventory D) maximizing utilization E) maximizing flow time

e

9) Which of the following considers process capacity when scheduling? A) cap loading B) constrained loading C) capacitated loading D) backward loading E) finite loading

e

1) With forward scheduling, jobs are scheduled as late as possible within the time allowed by the customer due dates.

f

Advertising and promotion are methods of manipulating product or service supply in aggregate planning.

f

One of the demand options of aggregate planning is to vary the workforce by hiring or layoffs.

f

Scheduling optimization systems used in retail stores typically track customer traffic in 4-hour time increments.

f

The level scheduling strategy allows lower inventories than the pure chase strategy.

f

2) The aggregate planning process usually includes dispatching of individual jobs.

false

3) ABC analysis is based on the presumption that carefully controlling all items is necessary to produce important inventory savings.

false