MGT 301 Flashcards
Exam 2
chapter 13
Aggregate planning has four requirements:
(1) a logical overall measure of sales and output (such as pounds of chips or cases of beer); (2) a forecast of demand for the intermediate planning period; (3) a method to determine operating costs; and (4) a model that combines forecasts and costs so that scheduling decisions can be made for the planning period.
Organizations with perishable goods (such as airlines, hotels, cruise lines, car rental agencies, etc.) have the following characteristics that make yield management helpful:
(1) the service can be sold in advance of consumption; (2) demand fluctuates; (3) resource capacity is relatively fixed; (4) demand can be segmented; and (5) variable costs are low and fixed costs are high.
The term used for intermediate-range capacity planning with a time horizon of three to eighteen months is
aggregate planning.
Aggregate planning is used to determine the quantity and timing of production for the intermediate future, usually defined as 3 to 18 months ahead. This planning is used to develop forecasts for future production plans.
Strategic planning tends to have a longer time horizon often including
1, 3, 5, 10, and 20 year plans.
Material requirement planning is focused on
identifying all of the materials that will be needed during a production cycle. This is an important element of the production process, but it does not focus on capacity planning.
“An optimal plan for minimizing the cost of allocating capacity to meet demand over several planning periods” best describes
the transportation method. The transportation method is focused on identifying the optimal plan for minimizing costs.
Graphical planning models do not use a quantitative approach and are not guaranteed to achieve an optimal solution.
The choice that best describes the counterseasonal demand option is
developing a mix of products that smoothes out their demands. Counterseasonal product mixing is focused on developing a diverse product line that will counterbalance fluctuations in demand. For instance, Honda makes lawnmowers and snowblowers.
In level scheduling, ____are kept uniform from month to month. This approach often results in increased inventory, but the stable work provides employers with well trained employees and a better end product.
Inventory levels and product mix are not modified under level scheduling.
production or workforce levels
The chase strategy is focused on trying to set production equal to
forecasted demand.
The objective of aggregate planning is to meet demand while _____over the planning period.
minimizing cost
Minimizing stockouts (running out of a particular item in a store) and maximizing service levels are important issues associated with
inventory management and quality management, respectively. These issues are not directly related to the aggregate planning process due to the fact that aggregate planning is focused on the production and timing of production to deal with demand variations in a cost-effective manner.
Yield management systems are designed to help companies____
maximize profit (or yield) by adjusting prices based on demand. For example, consider how an airline or cruise ship continuously adjusts prices based on demand for different segments of their service (first class, business class, general boarding).
______. Demand options, including back-ordering a product during high-demand periods, are ways that a business tries to react to demand fluctuations.
Back-ordering during high-demand periods is among the demand options of aggregate planning
Subcontracting is a capacity based option of aggregate planning that focuses on solving capacity issues by bringing in external labor. Varying workforce size through hiring and layoffs is another capacity option. Capacity options are targeted at production-based solutions.
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).
If holding costs are $2 per unit each period, 125 hours of regular employment should be used in period 1. At this rate of employment, the company can produce 125 units in period 1 and 125 units in period 2 for a total production run of 250 units.
Given the assumptions (that 1 unit can be produced per hour and the holding costs are $2 per unit), it would make sense to keep employment at 125 hours because holding costs are less than the overtime rate ($2 per unit versus $15 per hour). If the manager holds employment stable between the two time periods, he/she will be able to meet demand during period 2.
Planning tasks associated with loading, sequencing, expediting, and dispatching typically fall under
Planning tasks associated with loading, sequencing, expediting, and dispatching typically fall under short-range plans. Short-range plans typically have a time line shorter than three months and are typically focused on scheduling and job assignments.
Intermediate-range plans fall under the responsibility of operations managers and include sales planning, budgeting, and analyzing operating goals. Long-range plans fall under the top executives’ responsibility and include capacity decisions, new product plans, and facility location/expansion decisions.
Four strategies have been successfully implemented to control labor costs, including:
(1) accurate scheduling of labor-hours to assure quick response to customer demand; (2) an on-call labor resource that can be added or deleted to meet unexpected demand; (3) flexibility of individual worker skills that permits reallocation of available labor; and (4) flexibility in rate of output or hours of work to meet changing demand.
chapter 12
The economic order quantity model requires that:
(1) demand is known and constant, (2) lead time is known and constant, (3) the item has a constant ordering cost, (4) quantity discounts are not possible, and (5) inventory is received instantaneously. The economic order quantity model does not require that safety stock is constant.
In the probabilistic model, increasing the service level will
increase the cost of the inventory policy.
Probabilistic models are applicable when product demand (or other variables) are not known, but can be estimated by using probability distributions. Because these models rely on estimates, organizations must develop inventory policies that rely on an increased safety stock to buffer against inaccurate estimates. Reliance on increased levels of safety stock will increase the cost of the inventory policy (not reduce the cost of the inventory policy). 2 of 25
The two most important inventory-based questions answered by the typical inventory model are ____
when to place an order and how many of an item to order. Typical inventory models focus on determining timing (when to place an order) and quantity (how much to order).
If demand is not uniform and constant, the stockout risks can be controlled by _____
adding safety stock. Safety stock represents the buffer a company holds to reduce the risk of running out of inventory. Appropriate levels of safety stock balance stockout risks with the increased holding costs.
The EOQ model requires the assumption that demand is uniform and constant and, therefore, would not be appropriate in this situation. Placing an extra order does not take into account the variance in demand and, therefore, a stockout risk is still present. Raising the selling price may impact customer choice, but it is not an appropriate solution due to the potential negative long term impact on consumer demand for products.
Extra units that are held in inventory to reduce stockouts are called _____
safety stock. Safety stock represents inventory held at any point (raw materials, work-in-process, or finished goods) to prevent stockouts due to unpredictable spikes in demand, late shipments, long shipment times, or production breakdowns.
The reorder point represents when the business needs to place orders to allow for delivery and setup time without running out of an item. Demand variance represents the uneven demand pattern for certain inventory items. Just-in-time inventory represents an inventory management concept, but does not deal with a specific number of items held in stock.
P systems should have higher safety stock than Q systems. P systems, or fixed-period inventory systems, require that inventory is counted at the end of a specific period of time (e.g., monthly, quarterly, etc.). Because inventory is only counted at one specific time, there is an increased likelihood of a stockout. To reduce this likelihood, companies should have higher ____. Q systems, on the other hand, are fixed-quantity systems (or continuous review systems) and they primarily rely on established ______to ensure against stockouts.
safety stock, reorder points
The difference between the basic Economic Order Quantity (EOQ) model and the production order quantity model is that_____
the production order quantity model does not require the assumption of instantaneous delivery.
生产订单数量模型不需要假设瞬时交货。
The production order quantity model applies to producing situations. When producing goods, managers must allow for the time it takes to build or assemble the goods. In this case, the arrival of goods is not instantaneous.
生产订单数量模型适用于生产情况。 在生产商品时，管理人员必须留出时间来制造或组装商品。 在这种情况下，货物的到达不是瞬时的。
As with the EOQ model, the production order quantity model does require the assumption of a known, constant demand and a known, constant lead time. Both the EOQ and the production inventory model include holding costs, which represent the costs of storing inventory over time.
与EOQ模型一样，生产订单数量模型的确需要假设已知的恒定需求和已知的恒定提前期。 EOQ和生产库存模型都包含持有成本，该成本代表随时间推移存储库存的成本。
Cycle counting is ______
a process by which inventory records are verified for accuracy.
Cycle counting requires continuous audits and is used to count inventory and audit records based on the ABC model of inventory management. Class A items are counted regularly (e.g., daily or monthly), Class B items are counted less frequently (e.g., quarterly), and Class C items are counted relatively infrequently (e.g., every 6 months). This system of inventory auditing allows the most valuable items (Class A items) to be counted more frequently and is less disruptive to overall operations.
Cycle counting does not require or assume that all inventory records must be verified with the same frequency or that the most frequently used item must be counted more frequently. Instead, by using a cycle counting approach to inventory audits, companies are counting their most valuable inventory (Class A items) frequently and their least valuable inventory (Class B and Class C items) infrequently.
A system that triggers ordering on a uniform time basis is called _____
a fixed-period system.
A fixed-period inventory system makes purchases based on uniform and specific time periods (e.g., monthly, quarterly, etc.). The reorder point represents the appropriate level to place orders to allow for delivery and setup time without running out of an item. A fixed-quantity system is an EOQ based system that specifies the same order amount each time. The goal of all economic order quantity models is to minimize the total costs of ordering, setup, and holding costs by calculating the most efficient order quantity.
ABC analysis divides on-hand inventory into three classes generally based upon _____
annual dollar volume,
which is calculated by multiplying unit price by annual demand. ABC inventory analysis is based on the principle that a small percentage of items typically consume a larger portion of dollar volume. Class A items account for a large dollar value (approximately 70-80% of dollar usage), but a smaller part of inventory (approximately 15%). Class B items account 15-25% of total dollar usage and approximately 30% of total inventory. Class C items account for approximately 5% of total dollar usage and about 55% of inventory items. This approach to inventory management allows firms to focus on the few critical parts that drive dollar volume and not the many trivial ones.
One use of inventory is _____
to provide a hedge against inflation.
Inventory allows organizations to take advantage of quantity discounts that provide a buffer against future price increases and inflation. These advantages occur for any type of inventory (raw materials, work-in-process, finished goods, and maintenance/repair/operating). Inventory management does not deal directly with the production process. Instead, inventory management involves planning, coordinating, and controlling the acquisition, storage, handling, movement, and sale of different types of inventory.
The primary purpose of the basic economic order quantity model is
to minimize the sum of the setup and holding cost.
Q = sqrt(2DS/H)
D = demand unit S = ordering cost per year H = holding cost per year
The basic goals of the economic order quantity model are to minimize the total costs of ordering, setup, and holding and to compute the appropriate quantity to order. While organizations are interested in determining the optimum safety stock, the appropriate reorder point, and the most effective service level, these issues are not directly related to the economic order quantity model.
A disadvantage of the fixed-period inventory system is that ______
a stockout is possible.
Using a fixed-period inventory system increases the likelihood of a stockout because there is no routine count of inventory during a specific review period. Instead of basing inventory orders on the amount of stock on hand (or predetermined reorder points), inventory orders are made at the end of a specified time interval.
Fixed-period systems do not necessarily involve higher ordering costs than fixed-quantity inventory systems. Fixed-period inventory systems do not create the need for additional inventory records or lower average inventory level. While this approach does increase the likelihood of a stockout, it is appropriate for perpetual inventory systems where counting inventory is routine.
An inventory decision rule states “when the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered.”
14 is the reorder point, and 100 is the order quantity.
The reorder point represents the appropriate level to place orders to allow for delivery and setup time without running out of an item. The order quantity represents the total number of items that need to be ordered at each purchase interval. Safety stock represents inventory stock that is held to avoid potential stockouts and is not the same as a reorder point.
Policies based on ABC analysis might include investing more in supplier development for ____
A items.
Using ABC analysis allows companies to prioritize their inventory by the annual dollar volume. Class A items will get the most attention including supplier development, records verification, and forecasting. Class B will receive less attention and Class C items will receive the least amount of time and attention.
The four main categories of inventory include
raw material inventory, work-in-process inventory, maintenance/repair/operating inventory and finished goods inventory.
Raw material, work-in-process, and finished goods inventory represent what the organization will sell to customers. Maintenance/repair/operating inventory keeps the business operating, but is not directly sold to consumers.
