Deck 19: Sales and Operations Planning

Question 1

Subcontracting is viewed as a risky strategy because the firm may lose control of product design and pricing.

Answer 1

False

Question 2

The aggregate operations plan is developed from the master schedule and the strategic capacity plan.

Answer 2

False

Question 3

The sales and operations planning process consists of a series of meetings.

Answer 3

True

Question 4

The widespread adoption of computing technology has led to the virtual abandonment of simple cut-and-try charting and graphical methods to develop aggregate operations plans.

Question 5

Accurate medium-range planning increases the likelihood of operating within the limits of a budget.

Question 6

The aggregate operations plan differs in virtually every aspect in service organizations as contrasted with manufacturing organizations.

Question 7

Costs incurred in hiring, training, and laying off personnel are considered relevant aggregate operations planning costs.

Question 8

The increasing complexity of modern operations management has made simple cut-and-try charting and graphical methods formerly used to develop aggregate operations plans impractical and obsolete.

Question 9

The sales and marketing plans are typically developed separately from the aggregate operations plan as a way of cross-checking results to ensure the integrity of assumptions about the future.

Question 10

Backordering costs incurred in producing a given product type in a given time period are relevant aggregate operations planning costs.

Question 11

The operations plan should not be updated but should be followed precisely until the longest-term planning horizon has passed.

Question 12

Foregone profit margins are considered as relevant aggregate operations planning costs.

Question 13

The International Aggregate Planning Society (IAPS) has developed aggregate operations planning guidelines that are followed by a majority of manufacturing firms.

Question 14

The main purpose of the aggregate production plan is to specify the optimal combination of workforce level and inventory on hand.

Question 15

The sales and operations planning process is made up of a variety of analytical techniques that interact to produce short- and intermediate-term goals.

Question 16

In a services organization, strategic capacity planning follows process planning.

Question 17

Aggregation in sales and operations planning is by groups of customers on the supply side and by product families on the demand side of the firm's supply chain.

Question 18

The objective of the aggregate operations plan is to ensure that the marketing and sales plans are realistic.

Question 19

Fixed and variable costs incurred in producing a given product type in a given time period are relevant aggregate operations planning costs.

Question 20

Aggregate sales and operations planning occur in a company about every 3 to 18 months.

Question 21

In a logistics organization, vehicle dispatching immediately precedes vehicle loading.

Question 22

One of the conditions that makes yield management effective is when inventory is easily stored and held for a time when demand is stronger.

Question 23

Firms that match the production rate to the order rate by hiring and laying off employees as the order rate varies are following what is known as the chase strategy.

Question 24

Yield management is the process of allocating the right type of capacity to the right type of customer at the right prices at the right time to maximize revenue or yield.

Question 25

Pricing for a service should primarily relate to the cost of providing the service and has little to do with capacity issues the service provider might face.

Question 26

The term sales and operations planning was coined by companies to refer to a process that was traditionally referred to as capacity planning.

Question 27

Firms facing cyclical demand fluctuations would be wise to introduce complementary products whose cycles are the same as their current products.

Question 28

In an overview of the major operations planning activities in a typical logistics organization, which of the following activities does not come after sales and operations (aggregate) planning?

A) Process planning
B) Workforce scheduling
C) Vehicle loading
D) Materials requirements planning
E) Order scheduling

Question 29

A rate fence is a logical justification for different prices for what is essentially the same service.

Question 30

The aggregate operations planning variable "inventory on hand" refers to the balance of unused inventory carried over from the previous time period.

Question 31

Sales and operations planning is a process that helps a firm design products that are easier for marketing to sell.

Question 32

A rate fence is a person who books airline seats at low rates far in advance and sells the seats at a profit later.

Question 33

In an overview of the major operations planning activities in a typical organization, which of the following activities precedes sales and operations (aggregate) planning?

A) Process planning
B) Workforce scheduling
C) Master production scheduling
D) Materials requirements planning
E) Order scheduling

Question 34

Order scheduling is the step in the aggregate operations planning process that immediately follows material requirements planning.

Question 35

In services, once the aggregate staffing level is determined, the focus is on short-term workforce scheduling.

Question 36

Long-range planning generally covers a period of eighteen months or more.

Question 37

The master scheduling is a crucial input into the aggregate operations plan.

Question 38

The aggregate operations planning variable "workforce level" refers to the number of workers needed to accomplish the planned production.

Question 39

Short-range planning covers a period from one day to two weeks.

Question 40

The aggregate operations planning variable "production rate" refers to the number of units completed per unit of time.

Question 41

From an operational perspective, yield management is least effective under which of the following circumstances?

A) Demand can be segmented by customer.
B) The product can be sold in advance.
C) The product can be kept to be sold when demand is stronger.
D) Fixed costs are high, and variable costs are low.
E) Demand is highly variable.

Question 42

Matching the production rate to the order rate by hiring and laying off employees as the order rate varies is which of the following pure production planning strategies?

A) Stable workforce, variable work hours
B) Chase
C) Level
D) Meeting demand
E) Minimizing inventory

Question 43

From an operational perspective, yield management is least effective under which of the following circumstances?

A) Demand can be segmented by customer.
B) The product can be sold in advance.
C) Demand is highly variable.
D) Fixed costs are high, and variable costs are low.
E) Demand is stable and close to capacity.

Question 44

Using the cut-and-try method for aggregate operations planning, we can determine the production requirement in units of product. If the beginning inventory is 100 units, the demand forecast is 1,200, and the necessary safety stock is 20 percent of the demand forecast, which of the following is the production requirement?

A) 1,200
B) 1,300
C) 1,340
D) 1,500
E) 1,540

Question 45

In conducting aggregate operations planning, there are a number of required inputs. Which of the following inputs are considered internal to the firm?

A) Inventory levels and economic conditions
B) Market demand and subcontractor capacity
C) Current physical capacity and current workforce
D) Competitor behavior and current workforce
E) Current physical capacity and raw material availability

Question 46

In an overview of the major operations planning activities in a typical service organization, which of the following activities follows sales and operations (aggregate) planning?

A) Process planning
B) Workforce scheduling
C) Master scheduling
D) Materials requirements planning
E) Order scheduling

Question 47

Maintaining a stable workforce working at a constant output rate while shortages and surpluses are absorbed by fluctuating inventory levels, order backlogs, and allowing lost sales is which of the following production planning strategies?

A) Stable workforce, variable work hours
B) Chase
C) Level
D) Full employment
E) Skill maintenance

Question 48

Which of the following is considered a "pure" production planning strategy?

A) Variable workforce, stable work hours
B) Lag demand
C) Level playing field
D) Stable workforce, variable work hours
E) Product warehouse

Question 49

In conducting aggregate operations planning, there are a number of required inputs. Which of the following inputs are considered external to the firm?

A) Inventory levels and market demand
B) Raw material availability and competitor's behavior
C) Current workforce and economic conditions
D) Current physical capacity and market demand
E) Subcontractor capacity and inventory levels

Question 50

In an overview of the major operations planning activities in a typical logistics organization, which of the following activities most immediately follows sales and operations (aggregate) planning?

A) Process planning
B) Strategic capacity planning
C) Vehicle dispatching
D) Vehicle capacity planning
E) Warehouse receipt planning

Question 51

Using the cut-and-try method for aggregate operations planning, we can determine the production requirement in units of product. If the beginning inventory is 500 units, the demand forecast is 1,000, and the necessary safety stock is 10 percent of the demand forecast, which of the following is the production requirement?

A) 1,000
B) 600
C) 550
D) 450
E) 100

Question 52

The main purpose of aggregate operations planning is to specify the optimal combination of which of the following?

A) Workforce levels and inventory on hand
B) Inventory on hand and financing costs for that inventory
C) The strategic plan and the products available for sale
D) The workforce level and the degree of automation
E) Operational costs and the cash flow to support operations

Question 53

In conducting aggregate operations planning, there are a number of required inputs. Which of the following inputs are considered external to the firm?

A) Competitor behavior and economic conditions
B) Market demand and inventory levels
C) Subcontractor capacity and current workforce
D) Economic conditions and current physical capacity
E) Raw material availability and inventory levels

Question 54

Which of the following is a production planning strategy presented in the textbook?

A) Level
B) Strategic
C) Balanced
D) Synchronous
E) Optimal

Question 55

From an operational perspective, yield management is most effective under which of the following circumstances?

A) Demand cannot be segmented by customer.
B) Inventory is perishable.
C) Fixed costs are low, and variable costs are high.
D) The customer is a "captive" of the system.
E) The firm doing yield management is very profitable.

Question 56

What should have been the initial inventory in units of demand, if the production requirement in units of product is 900, demand forecast is 1,000, and the necessary safety stock is 20 percent of the demand forecast?

A) 300
B) 500
C) 100
D) 1,900
E) Cannot find it

Question 57

Which of the following is not one of the "number of interesting issues that arise in yield management"?

A) Pricing structures that must appear logical to the customer and justify different prices
B) Designing yield management programs that cannot be imitated by a competitor
C) How to handle variability in customer arrivals, duration, and interval
D) Managing the service process
E) Training workers and managers to work in a yield management environment

Question 58

Which of the following methods discussed in the text requires generating several alternative aggregate plans?

A) Trial and error
B) Production smoothing
C) Graphing and charting
D) Aggregate plan simulation
E) Cut and try

Question 59

Which of the following costs are relevant to aggregate operations planning?

A) Sunk costs
B) Transaction costs
C) Backordering costs
D) Legal costs
E) Fixed costs

Question 60

Using the cut-and-try method for aggregate operations planning, we can calculate the ending inventory and then calculate the safety stock as a percent of forecast demand. Suppose that the beginning inventory is 300, the production requirement in units of product is 1,350, and demand forecast is 1,500. What is the ending inventory and percent safety stock?

A) 200 and 10%
B) 150 and 10%
C) 300 and 20%
D) 450 and 30%
E) 150 and 20%

Question 61

Assume that production required in periods 1, 2 and 3 respectively are 1,200, 1,500, and 900 units. One worker during the planning horizon can produce two units in one day. Number of workdays are 22 in period 1, −17 in period 2, and 21 in period 3. Assume that the beginning inventory and the ending inventory required are 300 units each. What is the number of workers required during the planning horizon of three periods?

A) 60
B) 600
C) 35
D) 30
E) 300