Deck 8: Aggregate Planning in a Supply Chain

Question 1

An aggregate planning horizon is usually between three and five years.

Answer 1

False

Question 2

A linear programming formulation of an aggregate plan would typically use a constraint to limit the number of units produced using overtime or subcontracting labor.

Answer 2

True

Question 3

Short-term production serves as a broad blueprint for operations and establishes the parameters within which aggregate planning decisions are made.

Answer 3

False

Question 4

To create an aggregate plan,a company must specify the planning horizon for the plan and the duration of each period within the planning horizon.

Question 5

The aggregate planning problem is concerned with determining the production level,inventory level,and capacity level (internal and outsourced)for each period that maximizes the firm's profit over the planning horizon.

Question 6

As capacity utilization increases,it becomes less important to perform aggregate planning.

Question 7

An aggregate plan can be used to determine whether a company needs to hire or lay off workers.

Question 8

A chase strategy for aggregate planning synchronizes production rate with the demand rate.

Question 9

Linear programming finds the solution for an aggregate plan that creates the highest profit while satisfying the constraints that a company faces.

Question 10

Traditionally,much of aggregate planning is focused within an enterprise and may not always be seen as a part of supply chain management.

Question 11

The goal of aggregate planning is to satisfy demand in a way that minimizes profit.

Question 12

Aggregate planning is a process by which a company determines levels of capacity,production,subcontracting,inventory,stockouts,and even pricing over a specified time horizon.

Question 13

Most strategies that an aggregate planner actually uses are in combination,and are referred to as hybrid strategies.

Question 14

The goal of aggregate planning is to build a plan that satisfies demand while minimizing downtime.

Question 15

To improve the quality of aggregate plans,forecast errors must be taken into account when formulating aggregate plans.

Question 16

The aggregate planner must make a trade-off between capacity,inventory,and backlog costs.

Question 17

A linear programming formulation of an aggregate plan would typically have a different decision variable for per unit material cost and labor's hourly wage.

Question 18

A poor aggregate plan may result in a large amount of excess inventory and capacity,thereby raising costs.

Question 19

Breaking an aggregate plan into separate plans for each product creates a master production schedule.

Question 20

As inputs into the aggregate plan change,managers do not need to make changes to the aggregate plan.

Question 21

Aggregate planning should consider information from

A)only the enterprise as its breadth of scope.
B)downstream partners to produce forecasts.
C)upstream partners to determine constraints.
D)all of the above

Question 22

The operational parameter concerned with the number of units completed per unit time (such as per week or per month)is

A)production rate.
B)workforce.
C)overtime.
D)backlog.

Question 23

A poor aggregate plan can result in

A)appropriate inventory levels.
B)efficient use of capacity.
C)better sales and lost profits.
D)lost sales and lost profits.

Question 24

The length of the planning horizon in aggregate planning is usually between

A)one and three months.
B)three and eighteen months.
C)one and three years.
D)three and five years.

Question 25

Forecasting errors are dealt with in aggregate plans using either safety backlog or safety capacity.

Question 26

Aggregate planning solves problems involving

A)aggregate decisions and stock keeping unit (SKU)level decisions.
B)aggregate decisions or stock keeping unit (SKU)level decisions.
C)aggregate decisions rather than stock keeping unit (SKU)level decisions.
D)stock keeping unit (SKU)level decisions rather than aggregate decisions.

Question 27

Given that forecasts are always wrong to some degree,the aggregate plan needs to have some flexibility built into it if it is to be useful.

Question 28

The operational parameter concerned with the number of workers/units of capacity needed for production is

A)production rate.
B)workforce.
C)overtime.
D)backlog.

Question 29

The goal of aggregate planning is to

A)maximize the amount of inventory.
B)satisfy customers in a way that minimizes production.
C)satisfy demand in a way that maximizes profit.
D)maximize the amount of product shipped.

Question 30

________ is used to determine customer service levels.

A)Inventory held
B)Backlog/stockout quantity
C)Workforce hired/laid off
D)Machine capacity increase/decrease

Question 31

Aggregate planning,to be effective,requires inputs from

A)all customers.
B)all departments.
C)all suppliers.
D)throughout the supply chain.

Question 32

Much of aggregate planning has traditionally been focused

A)on short-term production scheduling.
B)on customer relationship management.
C)within an enterprise.
D)beyond enterprise boundaries.

Question 33

The operational parameter concerned with the planned inventory carried over the various periods in the planning horizon is

A)production rate.
B)overtime.
C)backlog.
D)inventory on hand.

Question 34

Safety capacity is defined as capacity used to satisfy demand that is lower than forecasted.

Question 35

The planning horizon is

A)the time period over which the aggregate plan is to produce a solution.
B)the duration of each time period in the aggregate plan.
C)the length of time required to produce the aggregate plan.
D)the solution to the aggregate plan.

Question 36

Companies should work with downstream partners to produce forecasts and with upstream partners to determine constraints when doing aggregate planning.

Question 37

An aggregate planner requires information on constraints.Which of the following is one of the typical constraints for an aggregate planner?

A)Inventory holding cost
B)Labor/machine hours required per unit
C)Stockout or backlog cost
D)Limits on overtime

Question 38

The process by which a company determines levels of capacity,production,subcontracting,inventory,stockouts,and even pricing over a specified time horizon is

A)aggregate planning.
B)detail planning.
C)inventory planning.
D)sales planning.

Question 39

Safety inventory is defined as inventory held to satisfy demand that is higher than forecasted.

Question 40

Aggregate planning is concerned with determining

A)the production level,sales level,and capacity for each period.
B)the demand level,inventory level,and capacity for each period.
C)the production level,inventory level,and capacity for each period.
D)the production level,forecast errors,and capacity for each period.

Question 41

Scenario 8.2 - Willow
A company faces the aggregate planning problem shown in the table below.Cost of regular production is $8 per unit,the cost of producing the same unit on overtime is $15,the cost of subcontracting is $12 per unit,and the cost of carrying a unit in inventory from one month to the next is $6.
The labor contract at the plant prohibits both overtime and subcontracting output to exceed 400 units in any five-month window.The plant capacity is 20 units per day produced using two shifts and the plant runs seven days a week.By policy,management wants to avoid stockouts.
How many units are produced using overtime in the optimal aggregate plan developed to address Scenario 8.2?

A)360
B)200
C)400
D)280

Question 42

Scenario 8.2 - Willow
A company faces the aggregate planning problem shown in the table below.Cost of regular production is $8 per unit,the cost of producing the same unit on overtime is $15,the cost of subcontracting is $12 per unit,and the cost of carrying a unit in inventory from one month to the next is $6.
The labor contract at the plant prohibits both overtime and subcontracting output to exceed 400 units in any five-month window.The plant capacity is 20 units per day produced using two shifts and the plant runs seven days a week.By policy,management wants to avoid stockouts.
Without actually solving the aggregate planning problem,it is safe to conclude that in the optimal solution to Scenario 8.2,

A)the total ending inventory will exceed the number of units made using overtime.
B)the number of units made using subcontracting will exceed the number of units made using overtime.
C)the number of units made using regular time will exceed the forecast.
D)the number of units made using subcontracting will exceed the number of units made using regular time.

Question 43

Scenario 8.3 - Mousetraps
A company faces the aggregate planning problem shown in the table below.Cost of regular production is $15 per unit,the cost of producing the same unit on overtime is $22.50,the cost of subcontracting is $27 per unit,and the cost of carrying a unit in inventory from one month to the next is $10.
The labor contract at the plant prohibits both overtime and subcontracting output to exceed 250 units in any five-month window.The plant capacity is 20 units per day produced using two shifts and the plant runs seven days a week.By policy,management wants to avoid stockouts.
What is the optimal total cost of the aggregate plan developed to address Scenario 8.3?

A)$47,200
B)$49,960
C)$50,400
D)$51,325

Question 44

A highly effective tool for a company to use when it tries to maximize profits while being subjected to a series of constraints is

A)aggregate programming.
B)distribution programming.
C)production programming.
D)linear programming.

Question 45

Most strategies that an aggregate planner actually uses are in combination and are referred to as the

A)adjustable strategy.
B)chase strategy.
C)level strategy.
D)mixed strategy.

Question 46

Scenario 8.2 - Willow
A company faces the aggregate planning problem shown in the table below.Cost of regular production is $8 per unit,the cost of producing the same unit on overtime is $15,the cost of subcontracting is $12 per unit,and the cost of carrying a unit in inventory from one month to the next is $6.
The labor contract at the plant prohibits both overtime and subcontracting output to exceed 400 units in any five-month window.The plant capacity is 20 units per day produced using two shifts and the plant runs seven days a week.By policy,management wants to avoid stockouts.
What is the optimal total cost of the aggregate plan developed to address Scenario 8.2?

A)$27,200
B)$20,960
C)$31,400
D)$26,600

Question 47

Scenario 8.3 - Mousetraps
A company faces the aggregate planning problem shown in the table below.Cost of regular production is $15 per unit,the cost of producing the same unit on overtime is $22.50,the cost of subcontracting is $27 per unit,and the cost of carrying a unit in inventory from one month to the next is $10.
The labor contract at the plant prohibits both overtime and subcontracting output to exceed 250 units in any five-month window.The plant capacity is 20 units per day produced using two shifts and the plant runs seven days a week.By policy,management wants to avoid stockouts.
How many units are produced using subcontracting in the optimal aggregate plan developed to address Scenario 8.3?

A)200
B)50
C)100
D)150

Question 48

The strategy where workforce (capacity)is kept stable but the number of hours worked is varied over time in an effort to synchronize production with demand is the

A)flexibility strategy.
B)chase strategy.
C)level strategy.
D)mixed strategy.

Question 49

Scenario 8.2 - Willow
A company faces the aggregate planning problem shown in the table below.Cost of regular production is $8 per unit,the cost of producing the same unit on overtime is $15,the cost of subcontracting is $12 per unit,and the cost of carrying a unit in inventory from one month to the next is $6.
The labor contract at the plant prohibits both overtime and subcontracting output to exceed 400 units in any five-month window.The plant capacity is 20 units per day produced using two shifts and the plant runs seven days a week.By policy,management wants to avoid stockouts.
How many months does the regular time output exceed plant capacity in the optimal solution to Scenario 8.2?

A)0
B)1
C)2
D)3

Question 50

The strategy where a stable machine capacity and workforce are maintained with a constant output rate,with inventory levels fluctuating over time,is the

A)adjustable strategy.
B)chase strategy.
C)level strategy.
D)mixed strategy.

Question 51

Which is the first month that overtime is used for the optimal aggregate plan for Scenario 8.3?

A)July
B)August
C)September
D)October

Question 52

What is the optimal total cost of the aggregate plan developed to address Scenario 8.1?

A)$16,700
B)$18,950
C)$18,450
D)$16,250

Question 53

The fundamental trade-offs available to an aggregate planner are between

A)capability,inventory,and backlog costs.
B)capability,inventory,and sales costs.
C)capacity,inventory,and backlog costs.
D)capacity,inventory,and sales costs.

Question 54

Demand is forecast for the next five months as 200,300,500,300,200.The production planner decides to adopt a level strategy,so over the next five months they should produce

A)200,300,500,300,200.
B)500,400,300,200,100.
C)100,200,300,400,500.
D)300,300,300,300,300.

Question 55

Which of these statements about Scenario 8.1 is evident without even developing an aggregate plan?

A)Some overtime will be needed.
B)Ending inventory must be negative.
C)Overtime must exceed subcontracting.
D)Subcontracting must exceed regular time output.

Question 56

Which month has a positive ending inventory for the optimal aggregate plan for Scenario 8.3?

A)August
B)September
C)October
D)November

Question 57

Scenario 8.1 - Gang Aft Agley
Gang Aft Agley,a manufacturing company,faces the aggregate planning problem shown in the table below.Cost of regular production is $5 per unit,the cost of producing the same unit on overtime is $7.50,the cost of subcontracting is $9 per unit,and the cost of carrying a unit in inventory from one month to the next is $2.
The labor contract at the plant prohibits both overtime and subcontracting output to exceed 300 units in any five month window.The plant capacity is 600 units per month produced using two shifts,regardless of the number of days in a month.By policy,management wants to avoid stockouts.
Use the information from Scenario 8.1 to determine the number of decision variables in this scenario.

A)10
B)15
C)20
D)24

Question 58

Demand is forecast for the next five months as 200,300,500,300,200.The production planner decides to adopt a chase strategy,so over the next five months they should produce

A)200,300,500,300,200.
B)500,400,300,200,100.
C)100,200,300,400,500.
D)300,300,300,300,300.

Question 59

The strategy where the production rate is synchronized with the demand rate by varying machine capacity or hiring and laying off employees as the demand rate varies is the

A)adjustable strategy.
B)chase strategy.
C)level strategy.
D)mixed strategy.

Question 60

Scenario 8.3 - Mousetraps
A company faces the aggregate planning problem shown in the table below.Cost of regular production is $15 per unit,the cost of producing the same unit on overtime is $22.50,the cost of subcontracting is $27 per unit,and the cost of carrying a unit in inventory from one month to the next is $10.
The labor contract at the plant prohibits both overtime and subcontracting output to exceed 250 units in any five-month window.The plant capacity is 20 units per day produced using two shifts and the plant runs seven days a week.By policy,management wants to avoid stockouts.
How many units are produced using overtime in the optimal aggregate plan developed to address Scenario 8.3?

A)250
B)200
C)100
D)180

Question 61

The aggregate plan needs to

A)be a final product because changes are disruptive to the supply chain.
B)be considered fixed because forecasts are usually accurate.
C)have some flexibility built into it because forecasts are always wrong.
D)have some flexibility built into it because forecasts are usually right.

Question 62

Which of these software vendors offer advanced planning systems?

A)SAP
B)Solver
C)Excel
D)Google

Question 63

The earliest supply chain software products were

A)aggregate planning modules.
B)cloud-based.
C)SaaS (software as a service).
D)enterprise resource planning modules.

Question 64

The aggregate plan should be communicated to

A)only the local firm.
B)only downstream partners.
C)only upstream partners.
D)all supply chain partners who will be affected by it.

Question 65

The quality of the aggregate plan can be improved by using information from

A)only the local firm.
B)only downstream partners.
C)only upstream partners.
D)all parts of the supply chain.

Question 66

Which month is less than 100% of regular capacity used for the optimal aggregate plan for Scenario 8.3?

A)100% of regular capacity is always used.
B)August
C)September
D)October

Question 67

What information does a master production schedule provide that an aggregate plan does not?

A)Expense information for the planning period
B)Revenue information for the planning period
C)Specific product family production information
D)A specific machine schedule for each order

Question 68

Capacity used to satisfy demand that is higher than forecasted is

A)safety backlog.
B)safety capacity.
C)safety inventory.
D)safety sales.

Question 69

One drawback of advanced planning systems is that

A)a small change in input data can result in radically different production plans.
B)the amount of computing power necessary requires a substantial source of electricity.
C)the amount of computing power requires significant cloud storage.
D)the technical expertise to operate most systems requires an advanced degree.

Question 70

How frequently should the aggregate plan be rerun?

A)Weekly
B)Monthly
C)Every 3 to 8 months
D)As inputs to the aggregate plan change

Question 71

When formulating aggregate plans,

A)forecast errors have no impact.
B)forecast errors must be taken into account.
C)forecast accuracy is assumed.
D)forecast accuracy is not a factor.

Question 72

Suppose management decides to relax the policy about stockouts on a month-to-month basis.Instead,they just want to make sure that they end the entire five-month planning period with a zero balance on inventory.They have never worked this way before and don't have an idea what it costs to stockout,so they assign a value of $0 for each unit stocked out.What is the optimal planning period cost?

A)$42,520
B)$45,220
C)$40,225
D)$42,250

Question 73

As capacity utilization increases,

A)it becomes less important to perform aggregate planning.
B)it becomes more important to perform aggregate planning.
C)it does not affect the importance of performing aggregate planning.
D)it lessens the importance of aggregate planning.

Question 74

The quality of the forecast can be improved by using information from

A)the focal firm.
B)downstream partners.
C)upstream partners.
D)competing supply chains.

Question 75

Inventory held to satisfy demand that is higher than forecasted is

A)safety backlog.
B)safety capacity.
C)safety inventory.
D)safety sales.

Question 76

Forecasting errors are dealt with using

A)safety backlog.
B)safety capacity.
C)safety inventory.
D)B and C only

Question 77

Advanced planning systems for aggregate planning rely heavily on ________ to deliver their full potential.

A)forecasting
B)the supply chain
C)constraints
D)data accuracy

Question 78

As a general rule,advanced planning systems rely on

A)game theory.
B)simulation.
C)nonlinear programming.
D)linear approximations of nonlinear functions.

Question 79

What is the name of the plan that breaks apart the aggregate plan into distinct product families?

A)Rough master production schedule
B)Rough cut capacity plan
C)SKU aggregate plan
D)Process plan

Question 80

Which of the following is an approach a company can use to create a buffer for forecast error using safety inventory?

A)Overtime
B)Carry extra workforce permanently
C)Build and carry extra inventories
D)Subcontracting