Module 3 - Demand Management

Question 1

What is the term for a distinctive characteristic of a good or service that may be provided by an option, an accessory, or an attachment?

Answer 1

Feature.

Question 2

A logistics company surveying customers asks how well the company performs against a set of important/non-important attributes. Assuming that appropriate action is taken in response to the survey, this is an example of putting a system in place to:

Answer 2

Increase value in product delivery. After plotting the results of a survey like this, a company would be able to see where their improvement emphasis should be applied.

Question 3

In which environment is the demand management function least likely to provide customer with promise dates?

Answer 3

MTS. In a make to stock environment, customers buy directly from the available inventory, so customer service is determined by whether the item is in stock or not.

Question 4

The practice of reducing the forecast by actual customer orders is known as

Answer 4

forecast consumption.

Question 5

Which of the following statement is true of forecast demand in the master production schedule as it relates to material requirements planning?
- forecast demand is ignored within the cumulative lead time
- forecast demand is ignored beyond the cumulative lead time
- forecast demand is treated like any other gross demand
- forecast demand is treated like safety stock replenishment

Answer 5

Forecast demand is treated like any other gross demand. Demand is demand, no matter what the source.

Question 6

Which of the following is a key component of customer relationship management?
- Promising from on hand inventory and future supply
- Handling customer requests for changes to due dates outside of the system
- differentiating the company’s customer experience from rivals by superior anticipation and responsiveness
- setting filter limits at multiples of MAD

Answer 6

Differentiating the company’s customer experience from rivals by superior anticipation and responsiveness

Question 7

Which of the following can be considered a customer service measurement?

Answer 7

Percentage of orders completely satisfied. Throughput and order fill percentages are incorrect because they are warehouse operations measurements. Inventory turns is incorrect because they are an inventory management measurement.

Question 8

Which of the following is an element of demand management?
- setting overall supply levels
- CRM
- RCCP
- Master Scheduling

Answer 8

CRM. Forecasting, order management or servicing, and customer relationship management (CRM) are the three elements of demand management.

Setting overall supply levels is incorrect, because it is conducted during S&OP, which takes place after demand management has provided input. RCCP is incorrect because it is a supply management element. Master scheduling is incorrect because it takes place after S&OP, which takes place after demand management has provided input.

Question 9

Which of the following is a measure of customer service?
- Inventory turns
- Capacity utilization
- master schedule fill rate
- percentage of orders shipped on time

Answer 9

The percentage of customer orders shipped on time is perhaps the most important metric in the business and a key measure of customer service.

Question 10

Customer relationship management supports total quality management because:

Answer 10

Both customer relationship management and total quality management are customer-satisfaction-oriented.

Question 11

A customer contacts a manufacturer’s salesperson and wants to purchase all production supply and capacity for a given item. Which of the following values will the salesperson need to obtain from his company to respond to his customer?

Answer 11

Capable-to-promise is the process of committing orders against available capacity as well as inventory. This process may involve multiple manufacturing or distribution sites.

Question 12

In a distribution environment, which of the following functions is generally considered a joint responsibility of the manufacturer and the distribution center?

Answer 12

Customer order management is handled by both the manufacturer and the distribution center, especially where demand variability causes unexpected stockouts, expediting is required, etc. Site analysis would be an issue only for the distribution center; warehousing finished goods and packaging would be the responsibility of the manufacturer.

Question 13

If supply and demand are not in balance at the aggregate supply level, what should be the priority to resolve the issue?

Answer 13

Adjusting supply even if it is difficult. Supply and demand balancing both occur regularly at a well-functioning organization, but the more difficult and costly efforts that may be required are typically attempted on the supply side before resorting to greater efforts on the demand side. This is because supply adjustments require internal changes while demand adjustments involve influencing external customers to accept changes.

Question 14

If a manufacturer typically produces 80 orders of a given product per year and calculates that three stock outs are acceptable, what is its customer service level?

Answer 14

Customer Service Level = (orders per period - stock out chances per period) / Orders over period
77/80=.96=96%

Question 15

Which of the following actions should a design engineering staff take to improve product performance and quality for a company adding new options for a product line?

Answer 15

standardize major component parts for the new options. Part standardization assists in cutting costs and removing unnecessary complexity.

Question 16

It is determined that the key to success in a particular market is the company’s ability to deliver a variety of high-quality products in less lead time than the industry standard. The operational emphasis should be on the operation’s:

Answer 16

Agility is the ability to successfully manufacture and market a broad range of low-cost, high-quality products and services with short lead times and varying volumes that provide enhanced value to customers through customization.

Question 17

Which of the following is an advantage of simultaneous engineering?

Answer 17

The product design is worked on at the same time that the process design takes place.

Question 18

Distribution replenishment requirements enter a manufacturer’s planning hierarchy in which of the following planning processes?

Answer 18

demand management. distribution requirements are part of the overall demand.

Question 19

A company sells a broad range of herbs and spices for health and cooking. The weekly order to the distribution center replenishes the individual items sold each week due to lack of storage capacity. The order may be modified by the store based on upcoming sales promotions or seasonality. Which of the following measures of customer service is of most value to the store?

Answer 19

line items shipped complete. While the correct items are shipped, the quantities may be incomplete. The order may arrive on time but not have the proper items or quantities.

Question 20

Which production environments will most benefit from capable-to-promise functionality?

Answer 20

assemble to order and make to order. Capable-to-promise is the process of committing orders against available capacity as well as inventory. Assemble-to-order and make-to-order are capacity- and lead-time-constrained, so orders should be promised based on the availability of resources.

Question 21

The function of recognizing all demands for goods and services to support the marketplace is called:

Answer 21

demand management

Question 22

A buyer asks a supplier to design a product to the buyer’s specifications. Which of the following steps is the buyer not responsible for?

Answer 22

production of samples. The production of samples is the responsibility of the supplier, who will eventually make the product if tests are successful.

The other three actions all are the responsibility of the buyer.

Question 23

A make-to-stock company is considering improving its customer service level through a combination of shipping from finished goods and shipping from final assembly. Which of the following inventory management considerations is most important to this new strategy?

Answer 23

production responsiveness. The key is whether production can receive and ship an order in the lead time quoted to customers.

Question 24

Forecasts are more accurate for -
- the long term
- individual products
- families of groups
- new products

Answer 24

families or groups. Forecasts are always more accurate for groups of products versus individual items. Forecasts tend to be more accurate when historical data is available (so forecasting for new products is difficult), and they are more accurate in the short term than in the long term.

Question 25

What forecasting technique uses average demand for a certain number of periods prior to the month being forecasted?

Answer 25

Moving average is an average of a certain number of the most recent observations.

Question 26

Exponential smoothing is generally used effectively under which conditions?

Answer 26

Stable demand. Exponential smoothing will detect trends but will lad actual demand. TI works well with stable items and for short range forecasting.

Question 27

Which qualitative forecasting technique are the opinions of experts combined in a series of iterations?

Answer 27

Delphi Method

Question 28

In which of the following processes are qualitative techniques appropriately used in?

Answer 28

Pyramid forecasting. Pyramid forecasting is correct because, at the conclusion of the roll-up process, a qualitative decision can be made before forcing the result down.

Question 29

In a multilevel bill of material, items A is the parent of two children, B and C, one of which has two children, D and E. Which Items represent independent demand?

Answer 29

Item A. The demand for Items D and E and dependent on the number of item B, which is in turn dependent on how many item As are to be produced.

Question 30

A company is introducing a new product that is expected to have service and warranty demand for one of the components. What is the best way to account for the part demand?

Answer 30

Forecast the component independent demand at the master production schedule level. Independent demand must be forecasted. Risk is minimal, as the component can also be used in production.

Question 31

A company introduced a new product five months ago, and it is selling at twice the rate projected by marketing. What is the best alpha factor to use in order to make the smoothed forecast as responsive as possible?

Answer 31

An alpha factor of 0.7 weights the most recent period’s usage the greatest, because in exponential smoothing a high alpha factor reacts more quickly to a trend and a low alpha factor reacts more slowly.

Question 32

Exponential smoothing techniques are desirable for which of the following reasons?
- low cost
-long range accuracy
-low cost and flexibility of application
- low cost, long range accuracy, and flexibility of application

Answer 32

low cost and flexibility of application. the low cost to assemble data and calculate a forecast and the flexibility of exponential smoothing are two important attributes of the technique.

Question 33

Which observation about forecast preparation is most accurate?
- seasonality should never be removed until after forecasting is complete
- demand forecasts need to use past sales as their basis
- circumstances relating to demand data should be recorded
- forecasts used at the operational level should be used in collard

Answer 33

circumstances relating to demand data should be recorded. Recording circumstances around data is a way of determining if wide variations from the forecast error are attributable to anomalies, which is important in analyzing forecast error.

One would never remove seasonality in forecasts used in master production scheduling, but one would in sales and operations planning. Forecasts should be based on demand and not sales, and while forecasts based on monetary units are used in business planning, manufacturing needs forecasts in terms of physical units.

Question 34

What flows downstream toward the customer in the transaction channel?
- goods
-title to goods
- cash for sales
- nothing other than cash for returns

Answer 34

title to goods.

While the distribution channel handles physical distribution, the transaction channel handles the related transactions, which include both payment of funds up the channel and transfer of ownership down the channel. Transfer of ownership is accomplished by transferring the title to the goods to the next party.

Question 35

A forecasting system is required for which of the following elements of total demand of an item?
- dependent demand
- end item demand and replacement part demand
- dependent demand and replacement part demand
- end item demand, dependent demand, and replacement part demand

Answer 35

end items and replacement parts are normally forecasted.

Question 36

The forecast for the previous month was 300, and actual demand was 320. Using an alpha factor of 0.3, what is the exponential smoothing forecast for the new month?

Answer 36

Exponential Smoothing = (Alpha x Actual Demand) + ((1 - Alpha) x Previous Forecast) = (0.3 x 320) + (0.7 x 300) = 306

Question 37

Which of the following techniques is best for relating one set of forecast economic data to another set of economic data?

Answer 37

Regression analysis is a statistical technique for determining the best mathematical expression describing the functional relationship between one response and one or more independent variables.

Question 38

What is the key to reducing costs, improving quality, reducing delivery lead time, and improving due-date performance for organizations conducting business to business e-commerce?

Answer 38

connectivity. The Dictionary defines B2B as follows, “Business conducted over the internet between businesses. The implication is that this connectivity will cause businesses to transform themselves via supply chain management to become virtual organizations—reducing costs, improving quality, reducing delivery lead time, and improving due-date performance.”