Deck 9: Sales and Operations Planning: Planning Supply and Demand

Question 1

Predictable variability is change in demand that cannot be forecasted.

Answer 1

False

Question 2

A firm that purchases peak production capability from other companies is using subcontracting.

Answer 2

True

Question 3

The use of a seasonal workforce is common in the tourism industry.

Answer 3

True

Question 4

When performing aggregate planning,the goal of all firms in the supply chain should be to maximize individual firm profits.

Question 5

Promoting during a peak demand month may decrease overall profitability if a significant fraction of the demand increase results from a forward buy.

Question 6

The advantage of carrying enough manufacturing capacity to meet demand in any period is very low inventory costs,because no inventory needs to be carried from period to period.

Question 7

Faced with predictable variability of demand,a company's goal is to respond in a manner that maximizes profitability.

Question 8

A firm that uses a temporary workforce during the peak season to increase capacity to match demand is using a seasonal workforce.

Question 9

Determining how profits will be allocated to different members of the supply chain is a key to successful collaboration.

Question 10

The disadvantage of building up inventory during the off season to keep production stable year round is the expensive capacity that would go unused during most months when demand was lower.

Question 11

As forward buying becomes a smaller fraction of the demand increase from a promotion,it is less profitable to promote during the peak period.

Question 12

Scheduling the workforce so that the available capacity better matches demand is using time flexibility from the workforce.

Question 13

The use of a part-time workforce to increase the capacity flexibility by enabling the firm to have more people at work during peak periods is designing product flexibility into the production processes.

Question 14

When faced with seasonal demand,a firm should use a combination of pricing (to manage demand)and production and inventory (to manage supply)to improve profitability.

Question 15

Offering a promotion during a peak period that has significant forward buying creates even more variable demand than before the promotion.

Question 16

In general,as the fraction of increased demand coming from forward buying grows,offering the promotion during the peak demand period becomes more attractive.

Question 17

Pricing decisions based only on revenue considerations often result in an increase in overall profitability.

Question 18

The use of dual facilities to manage capacity may be hard to sustain if the labor market is tight.

Question 19

A firm can vary supply of product by controlling production capacity and inventory.

Question 20

A firm that uses flexible work hours from the workforce to manage capacity to better meet demand is using a seasonal workforce.

Question 21

The advantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is

A)very low inventory costs because no inventory needs to be carried from period to period.
B)much of the expensive capacity would go unused during most months when demand was lower.
C)in the fact that a firm could get by with a smaller,less expensive factory.
D)in the fact that a firm could get by with a larger,more expensive factory.

Question 22

In this approach to managing capacity,a firm has flexible production lines whose production rate can easily be varied.

A)Time flexibility from workforce
B)Use of subcontracting
C)Designing product flexibility into the production processes
D)Use of seasonal workforce

Question 23

A firm can vary supply of product by controlling

A)revenue.
B)pricing.
C)demand.
D)capacity.

Question 24

The disadvantage of maintaining enough manufacturing capacity to meet demand in any period is

A)much of the expensive capacity would go unused during most months when demand was lower.
B)the expensive capacity would be used consistently throughout the year.
C)most of the expensive capacity would still be used during most months when demand was lower.
D)very low inventory costs because no inventory needs to be carried from period to period.

Question 25

The capacity management approach that uses a temporary workforce during the peak season to increase capacity to match demand is

A)time flexibility from workforce.
B)the use of seasonal workforce.
C)the use of subcontracting.
D)the use of dual facilities-dedicated and flexible.

Question 26

In this approach to managing capacity,a firm purchases peak production so that internal production remains level and can be done cheaply.

A)Time flexibility from workforce
B)Use of subcontracting
C)Use of dual facilities-specialized and flexible
D)Use of seasonal workforce

Question 27

In this approach to managing capacity,a firm uses flexible work hours by the workforce to manage capacity to better meet demand.

A)Time flexibility from workforce
B)Use of seasonal workforce
C)Use of subcontracting
D)Use of dual facilities-specialized and flexible

Question 28

The advantage of maintaining enough manufacturing capacity to meet demand in any period is

A)very low inventory costs because inventory needs to be carried from period to period.
B)very low inventory costs because no inventory needs to be carried from period to period.
C)very high inventory costs because no inventory needs to be carried from period to period.
D)very high inventory costs because expensive capacity would go unused during most months when demand was lower.

Question 29

In this approach to managing capacity,a firm uses a temporary workforce during the peak season to increase capacity to match demand.

A)Time flexibility from workforce
B)Use of subcontracting
C)Use of dual facilities-specialized and flexible
D)Use of seasonal workforce

Question 30

The capacity management approach that uses flexible work hours from the workforce to manage capacity to better meet demand is

A)time flexibility from workforce.
B)use of seasonal workforce.
C)use of subcontracting.
D)use of dual facilities-dedicated and flexible.

Question 31

The disadvantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is

A)very low inventory costs because no inventory needs to be carried from period to period.
B)very high inventory costs because inventory needs to be carried from period to period.
C)in the fact that a firm could get by with a smaller,less expensive factory.
D)in the fact that a firm could get by with a larger,more expensive factory.

Question 32

________ variability is change in demand that can be forecasted.

A)Capacity
B)Predictable
C)Inventory
D)Backlog

Question 33

The advantage of offering a price promotion during periods of low demand to shift some of the demand into a slow period is

A)a demand pattern that is less expensive to supply.
B)very high inventory costs because inventory needs to be carried from period to period.
C)in the fact that a firm could get by with a smaller,more expensive factory.
D)much of the expensive capacity would go unused during most months when demand was lower.

Question 34

With supply and demand management decisions being made independently,

A)it is increasingly difficult to coordinate the supply chain,thereby increasing profit.
B)it is increasingly difficult to coordinate the supply chain,thereby decreasing profit.
C)it is easier to coordinate the supply chain,thereby decreasing profit.
D)it is easier to coordinate the supply chain,thereby increasing profit.

Question 35

A firm can vary supply of product by controlling

A)inventory.
B)pricing.
C)demand.
D)revenue.

Question 36

A firm can vary supply of product by controlling

A)production capacity and inventory.
B)production capacity and price promotions.
C)price promotions and inventory.
D)production capacity and inventory promotions.

Question 37

A firm can handle predictable variability by managing

A)supply using capacity,inventory,trade promotions,and backlogs.
B)supply using capacity,inventory,subcontracting,and backlogs.
C)demand using short-term price discounts and trade promotions.
D)B and C only

Question 38

Predictable variability is

A)change in demand that can be forecasted.
B)change in demand that cannot be forecasted.
C)change in demand that has been planned.
D)change in demand that has been scheduled.

Question 39

Companies typically divide the task of supply and demand so that

A)Marketing manages demand and Operations manages supply.
B)Marketing manages supply and Operations manages demand.
C)Marketing manages demand and supply.
D)Operations manages demand and supply.

Question 40

Seasonal demand can be met by

A)maintaining enough manufacturing capacity to meet demand in any period.
B)building up inventory during the off season to meet demand during peak seasons.
C)offering a price promotion during periods of low demand to shift some of the demand into a slow period.
D)all of the above

Question 41

Which approach to capacity management may be hard to sustain if the labor market is tight?

A)Time flexibility from workforce
B)Use of seasonal workforce
C)Use of subcontracting
D)Use of dual facilities-dedicated and flexible

Question 42

Which approach to capacity management would only be effective if the overall demand across all the products is relatively stable?

A)Use of seasonal workforce
B)Use of subcontracting
C)Use of dual facilities-dedicated and flexible
D)Designing product flexibility into the production processes

Question 43

Pricing decisions based only on revenue considerations often result in

A)a decrease in overall profitability.
B)an increase in overall profitability.
C)a decrease in overall revenue.
D)a decrease in supply chain revenue.

Question 44

The promotion and pricing decisions made by marketing and sales typically have the objective of

A)maximizing profitability.
B)minimizing profitability.
C)minimizing revenue.
D)maximizing revenue.

Question 45

Which approach to capacity management would use a part-time workforce to increase capacity flexibility by enabling the firm to have more people at work during peak periods?

A)Time flexibility from workforce
B)Use of seasonal workforce
C)Use of subcontracting
D)Use of dual facilities-dedicated and flexible

Question 46

Which approach to capacity management makes use of overtime,which is varied to match the variation in demand?

A)Time flexibility from workforce
B)Use of seasonal workforce
C)Use of subcontracting
D)Use of dual facilities-dedicated and flexible

Question 47

One key to successful collaboration when the supply chain is performing aggregate planning is

A)determining how losses will be allocated to different members of the supply chain.
B)determining how profits will be allocated to different members of the supply chain.
C)determining how labor will be allocated to different members of the supply chain.
D)determining how customers will be allocated to different members of the supply chain.

Question 48

Which approach to capacity management makes use of spare plant capacity that exists in the form of hours when the plant is not operational?

A)Time flexibility from workforce
B)Use of seasonal workforce
C)Use of subcontracting
D)Use of dual facilities-dedicated and flexible

Question 49

The capacity management approach where a firm purchases peak production from another firm so that internal production remains level and can be done cheaply is

A)time flexibility from workforce.
B)the use of seasonal workforce.
C)the use of subcontracting.
D)the use of dual facilities-dedicated and flexible.

Question 50

Which approach to capacity management would require that the workforce be multi-skilled and easily adapt to being moved from line to line?

A)Time flexibility from workforce
B)Use of seasonal workforce
C)Use of dual facilities-dedicated and flexible
D)Designing product flexibility into the production processes

Question 51

Which approach to capacity management would use production machinery that can be changed easily from producing one product to another?

A)Time flexibility from workforce
B)Use of subcontracting
C)Use of dual facilities-dedicated and flexible
D)Designing product flexibility into the production processes

Question 52

Which approach to capacity management would schedule the workforce so that the available capacity better matches demand?

A)Time flexibility from workforce
B)Use of seasonal workforce
C)Use of subcontracting
D)Use of dual facilities-dedicated and flexible

Question 53

When planning,the goal of all firms in the supply chain should be to maximize supply chain profits because

A)this leaves them less profit to divide among themselves.
B)this leaves them more profit to divide among themselves.
C)this outcome leaves them more profit to pay tax on.
D)this outcome will increase their charitable giving.

Question 54

The capacity management approach where a firm has production lines whose production rate can easily be varied to match demand is

A)time flexibility from workforce.
B)the use of seasonal workforce.
C)the use of subcontracting.
D)designing product flexibility into the production processes.

Question 55

The key to which capacity management approach would involve having both volume (fluctuating demand from a manufacturer)and variety flexibility (demand from several manufacturers)to be sustainable?

A)Time flexibility from workforce
B)Use of seasonal workforce
C)Use of subcontracting
D)Use of dual facilities-dedicated and flexible

Question 56

When most of the products a firm produces have the same peak demand season,in order to meet predictable variability with inventory,it must

A)use common components across multiple products.
B)use a seasonal workforce.
C)build inventory of high demand or predictable demand products.
D)use subcontracting.

Question 57

The capacity management approach where a firm builds facilities to produce a relatively stable output of products over time in a very efficient manner and facilities to produce a widely varying volume and variety of products,but at a higher unit cost is

A)time flexibility from workforce.
B)the use of seasonal workforce.
C)the use of subcontracting.
D)the use of dual facilities-dedicated and flexible.

Question 58

The pricing and promotion decisions are often made by

A)marketing and sales.
B)marketing and operations.
C)operations and sales.
D)marketing,operations,and sales.

Question 59

Which of the following is an approach that firms can use when managing inventory to meet predictable demand variability?

A)Time flexibility from workforce
B)Use of seasonal workforce
C)Use of subcontracting
D)Using common components across multiple products

Question 60

Supply chains can influence demand by using

A)production capacity and inventory.
B)pricing and other promotions.
C)price promotions and inventory.
D)production capacity and inventory promotions.

Question 61

The Okra Colada
An okra farm anticipates highly seasonal demand for their product,tender pods of okra that can be made into the new drink sensation,the okra colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the tuna colada.Once everyone in the test market had actually sampled the drink,demand fell to zero.
The costs for the managerial levers appear in this table.
The base price per okra colada is $40 per unit and there is no promotion,but management is seriously considering different promotional plans.The beginning workforce level is 80 workers.
Use the Okra Colada scenario to answer this question.What is the ideal workforce level throughout January-June?

A)84 workers
B)80 workers
C)57 workers
D)53 workers

Question 62

Which factor favors promotion during low-demand periods?

A)High forward buying
B)High ability to steal market share
C)High ability to increase overall market
D)High margin

Question 63

An increase in consumption of the product either from new or existing customers is

A)market growth.
B)stealing share.
C)forward selling.
D)forward buying.

Question 64

The Okra Colada
An okra farm anticipates highly seasonal demand for their product,tender pods of okra that can be made into the new drink sensation,the okra colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the tuna colada.Once everyone in the test market had actually sampled the drink,demand fell to zero.
The costs for the managerial levers appear in this table.
The base price per okra colada is $40 per unit and there is no promotion,but management is seriously considering different promotional plans.The beginning workforce level is 80 workers.
Use the Okra Colada scenario to answer this question.What is the optimal profit when using linear programming to solve this sales and operations planning problem?

A)$159,330
B)$183,440
C)$167,550
D)$175,660

Question 65

Which factor favors promotion during peak-demand periods?

A)Low margin
B)Low ability to steal market share
C)High ability to increase overall market
D)High margin

Question 66

Average inventory

A)increases if a promotion is run during the peak period.
B)increases if a promotion is run during the off-peak period.
C)decreases if a promotion is run during the peak period.
D)decreases if a promotion is run during the off-peak period.

Question 67

The Okra Colada
An okra farm anticipates highly seasonal demand for their product,tender pods of okra that can be made into the new drink sensation,the okra colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the tuna colada.Once everyone in the test market had actually sampled the drink,demand fell to zero.
The costs for the managerial levers appear in this table.
The base price per okra colada is $40 per unit and there is no promotion,but management is seriously considering different promotional plans.The beginning workforce level is 80 workers.
Use the Okra Colada scenario to answer this question.Which of the following statements is true when using linear programming to solve this sales and operations planning problem?

A)More workers are hired than laid off.
B)More units are built using subcontracting than using overtime.
C)The number of stockouts exceeds the number of units in ending inventory from January-May.
D)The number of units subcontracted exceeds the number of stockouts that occur.

Question 68

Offering a promotion during a peak period that has significant forward buying

A)creates a desirable demand pattern.
B)creates a demand pattern less costly to serve.
C)creates a demand pattern even more costly to serve.
D)shifts demand from the peak period to the slow period.

Question 69

As the product margin declines,promoting during the peak demand period becomes

A)less profitable.
B)more profitable.
C)less of a risk.
D)more desirable.

Question 70

Promoting during a peak demand month may decrease overall profitability if

A)a small fraction of the demand increase results from a forward buy.
B)any of the demand increase results from a forward buy.
C)a significant fraction of the demand increase results from a forward buy.
D)none of the above

Question 71

The Okra Colada
An okra farm anticipates highly seasonal demand for their product,tender pods of okra that can be made into the new drink sensation,the okra colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the tuna colada.Once everyone in the test market had actually sampled the drink,demand fell to zero.
The costs for the managerial levers appear in this table.
The base price per okra colada is $40 per unit and there is no promotion,but management is seriously considering different promotional plans.The beginning workforce level is 80 workers.
Use the Okra Colada scenario to answer this question.What is the optimal total cost when using linear programming to solve this sales and operations planning problem?

A)$424,140
B)$414,240
C)$400,340
D)$434,040

Question 72

The Tuna Colada
A fishing consortium anticipates highly seasonal demand for their product,yellowtail tuna steaks that can be made into the new drink sensation,the tuna colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the okra colada with one key difference.The tuna colada is being positioned as a healthier alternative to eggnog,so demand is expected to climb throughout the planning period with a peak in December.
The costs for the managerial levers appear in this table.
The base price per tuna colada is $75 and there is currently no promotion,hence,no forward buying,but management is seriously considering different promotional plans.The beginning workforce level is 80 employees.
Use the Tuna Colada scenario to answer this question.If this problem is to be solved using linear programming,how should the objective function read?

A)Minimize total cost
B)Maximize total revenue
C)Minimize total price
D)Maximize total demand

Question 73

The Okra Colada
An okra farm anticipates highly seasonal demand for their product,tender pods of okra that can be made into the new drink sensation,the okra colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the tuna colada.Once everyone in the test market had actually sampled the drink,demand fell to zero.
The costs for the managerial levers appear in this table.
The base price per okra colada is $40 per unit and there is no promotion,but management is seriously considering different promotional plans.The beginning workforce level is 80 workers.
Use the Okra Colada scenario to answer this question.What is the minimum value for the cost of a single stockout to ensure that there are no stockouts during the six-month planning period?

A)$15
B)$20
C)$10
D)$25

Question 74

The Okra Colada
An okra farm anticipates highly seasonal demand for their product,tender pods of okra that can be made into the new drink sensation,the okra colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the tuna colada.Once everyone in the test market had actually sampled the drink,demand fell to zero.
The costs for the managerial levers appear in this table.
The base price per okra colada is $40 per unit and there is no promotion,but management is seriously considering different promotional plans.The beginning workforce level is 80 workers.
Use the Okra Colada scenario to answer this question.What constraints are associated with the level of inventory at the end of each period when using linear programming to solve this sales and operations planning problem?

A)EIJAN-MAY = 0
B)EIJUNE ≥ 500,EIJAN-MAY = 0
C)EIJAN-MAY ≥ 0
D)EIJUNE ≥ 500,EIJAN-MAY ≤0

Question 75

Customers moving up future purchases to the present is

A)market growth.
B)stealing share.
C)forward selling.
D)forward buying.

Question 76

The Okra Colada
An okra farm anticipates highly seasonal demand for their product,tender pods of okra that can be made into the new drink sensation,the okra colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the tuna colada.Once everyone in the test market had actually sampled the drink,demand fell to zero.
The costs for the managerial levers appear in this table.
The base price per okra colada is $40 per unit and there is no promotion,but management is seriously considering different promotional plans.The beginning workforce level is 80 workers.
Use the Okra Colada scenario to answer this question.What should the objective function be when using linear programming to solve this sales and operations planning problem?

A)Minimize total cost
B)Maximize total revenue
C)Minimize total price
D)Maximize total demand

Question 77

Customers substituting the firm's product for a competitor's product is

A)market growth.
B)stealing share.
C)forward selling.
D)forward buying.

Question 78

In general,as the fraction of increased demand coming from forward buying grows,offering the promotion during the peak demand period becomes

A)less attractive.
B)more attractive.
C)more profitable.
D)less significant.

Question 79

Which factor favors promotion during low-demand periods?

A)High margin
B)High ability to steal market share
C)High ability to increase overall market
D)Low margin

Question 80

The Okra Colada
An okra farm anticipates highly seasonal demand for their product,tender pods of okra that can be made into the new drink sensation,the okra colada.Their estimate of the demand profile appears below.This forecast is based on the demand profile of last year's drink,the tuna colada.Once everyone in the test market had actually sampled the drink,demand fell to zero.
The costs for the managerial levers appear in this table.
The base price per okra colada is $40 per unit and there is no promotion,but management is seriously considering different promotional plans.The beginning workforce level is 80 workers.
Use the Okra Colada scenario to answer this question.Which of the following statements is true when using linear programming to solve this sales and operations planning problem?

A)No layoffs occur.
B)No stockouts occur.
C)No subcontracting is used.
D)No overtime is used.