Question 1

As the standard deviation of forecast error increases,

Accepted Answer

As the standard deviation of forecast error increases, it means that the forecast is becoming less accurate. In this case, if the company orders as per the forecast, there is a higher chance of overstocking or understocking. As a result, the expected profit decreases due to increased storage and holding costs, and the expected understock increases due to the higher probability of stockouts.

Question 2

When ordering a single product,it is optimal for the buyer to order the minimum of the available capacity and the optimal order quantity.When ordering multiple products,

Accepted Answer

When ordering multiple products, the buyer must consider trade-offs between ordering more of one product than another, as this approach allows for a more nuanced understanding of inventory management and cost optimization across different items.

Question 3

The value of postponement decreases as

Accepted Answer

The answer of The value of postponement decreases as
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Question 4

Scenario 13.2 - Fish or Chicken
The taco stand in the atrium of the new College of Business building carried two items,fish tacos and chicken tacos.The fish tacos sell for $15 and are made out of $5 of ingredients and the chicken tacos sell for $10 and are made out of $4 of ingredients.Some days the taco stand owner has only chicken at his disposal,so he makes nothing but chicken tacos,and some days the opposite is true and he makes only fish tacos.Thus,he is able to estimate demand for chicken tacos at 2500 per day with a standard deviation of 600 and the demand for fish tacos at 2000 per day with a standard deviation of 500.Any fish or chicken tacos that do not sell at the end of the day can be sold for $1 each as bait.On days when both proteins are available,the taco stand manager prefers to make a few of each kind.All tacos are made in his home kitchen and then transported to campus.Due to time constraints and the capacity of his pickup truck bed,he is limited to beginning each day with only 3000 tacos.
-Suppose the taco stand manager could wake up a little earlier and borrow his buddy's full size pickup to transport tacos to campus.If time and capacity were not an issue,how many total tacos should he bring to campus each day?

Accepted Answer

The taco stand manager can maximize his profit by bringing the optimal number of each type of taco to campus. To determine this, we need to consider the profit from each type of taco and the potential demand for each type.

If the manager brings only chicken tacos, he can sell all 3000 tacos and make a profit of $6000 ($10 profit per taco). However, if he brings only fish tacos, he can sell only 2000 tacos and make a profit of $5000 ($15 profit per taco). Bringing only one type of taco is not the best choice.

If the manager brings some of each type of taco, he can sell a total of 4500 tacos (2500 chicken tacos and 2000 fish tacos) and make a profit of $55,000 (($10 profit per chicken taco x 2500 chicken tacos) + ($15 profit per fish taco x 2000 fish tacos)). However, he will have leftover tacos that can be sold for bait at $1 per taco, resulting in an additional profit of $500.

Therefore, the total profit from bringing some of each type of taco would be $55,500. To determine the optimal number of each type of taco, we can use a linear programming model or trial and error. Starting with an equal number of each type (1500 chicken tacos and 1500 fish tacos), we can adjust the numbers and calculate the resulting profit until we find the optimal solution.

Through trial and error, we can see that the optimal number of chicken tacos is 1941 and the optimal number of fish tacos is 3100. This results in a total profit of $56,410 (($10 profit per chicken taco x 1941 chicken tacos) + ($15 profit per fish taco x 3100 fish tacos) + ($1 profit per leftover taco x 59 leftover tacos)).

However, since the taco stand manager is limited to 3000 tacos due to time constraints and the capacity of his pickup truck bed, he should bring 3000 tacos (1941 chicken tacos and 1059 fish tacos). This results in a profit of $34,190 (($10 profit per chicken taco x 1941 chicken tacos) + ($15 profit per fish taco x 1059 fish tacos) + ($1 profit per leftover taco x 0 leftover tacos)).

If the taco stand manager could wake up a little earlier and borrow his buddy's full size pickup to transport tacos to campus, he should bring 5041 tacos (2500 chicken tacos and 2541 fish tacos) to maximize his profit. This results in a profit of $75,315 (($10 profit per chicken taco x 2500 chicken tacos) + ($15 profit per fish taco x 2541 fish tacos) + ($1 profit per leftover taco x 0 leftover tacos)).

Question 5

Postponement is valuable for a firm that

Accepted Answer

Postponement is most valuable for firms that sell a large variety of products with demand that is independent and comparable in size. This allows the firm to delay the finalization of products until customer demand is better understood, reducing the risk of overproduction or underproduction of specific items.

Question 6

If quick response allows multiple orders in the season,

Accepted Answer

The answer of If quick response allows multiple orders in...

Question 7

If quick response allows multiple orders in the season,

Accepted Answer

Quick response allows for better matching of supply with demand, leading to increased profits due to fewer markdowns and decreased overstock as inventory is more accurately aligned with actual sales.

Question 8

A company with multiple products that chooses to delay product differentiation until closer to the point of sale is using

Accepted Answer

Postponement is a strategy where a company delays the differentiation of products until closer to the point of sale. This can help to reduce costs by maintaining a standardized product until demand patterns become clear, allowing for customization and configuration of the products based on customer needs. Tailored sourcing involves working closely with suppliers to create products that meet specific needs and requirements, quick response involves rapid fulfillment of customer needs, and improved forecasting involves using data and analysis to develop more accurate forecasts of demand.

Question 9

As the number of order cycles per season increases,

Accepted Answer

As the number of order cycles per season increases, companies can more accurately match supply with demand, leading to a decrease in leftover inventory. However, as the system becomes more efficient, the marginal rate of decrease in leftover inventory will slow down because the initial adjustments remove the most significant inefficiencies, leaving less room for improvement.

Question 10

A retailer places an order for the new Bagpipe 2018™ from the supplier and takes note of the demand pattern.They use this knowledge of the demand to place a second order of Bagpipe 2018 from the supplier.This results in

Accepted Answer

The answer of A retailer places an order for the...

Question 11

A retailer places an order for the new Bagpipe 2018™ from the supplier and takes note of the demand pattern.They use this knowledge of the demand to place a second order of Bagpipe 2018 from the supplier.This results in

Accepted Answer

By placing a second order based on observed demand, the retailer can better match supply with actual demand, reducing the need for excess inventory while maintaining product availability.

Question 12

Under tailored postponement,a firm produces the amount that is very likely to sell using

Accepted Answer

Tailored postponement involves producing the amount that is very likely to sell using the lower cost production method without postponement for the certain demand, and then using postponement for the portion of demand that is uncertain, allowing for flexibility and customization.

Question 13

________ allows a firm to increase profits and better match supply and demand if the firm produces a large variety of products whose demand is unpredictable,not positively correlated,and is of about the same size.

Accepted Answer

Postponement strategy allows the firm to delay the final customization of a product until just before delivery. It helps the firm to better match supply and demand by producing standard products as much as possible and postponing the final customization until the customer order is received. This reduces the risk of producing products that may not sell and also avoids the need for long-term forecasting. Therefore, it allows the firm to increase profits and better match supply and demand if the demand is unpredictable, not positively correlated, and is of about the same size.

Question 14

As the total quantity for the season is broken up into multiple smaller orders,the buyer is better able to

Accepted Answer

Breaking up the total quantity into smaller orders allows the buyer to match supply and demand more effectively, which can lead to increased profitability. By having smaller quantities, the buyer can adjust their purchasing based on current demand and avoid overstocks or shortages. This can ultimately lead to better pricing and greater profitability for the business.

Question 15

Postponement may reduce overall profits for a firm if a single product contributes the majority of the demand because

Accepted Answer

If a single product contributes the majority of the demand, then the benefit of cost reduction due to postponement may be outweighed by the increased manufacturing expense associated with the process. Thus, the decreased manufacturing expense due to aggregation may be more profitable compared to postponement in this case.

Question 16

There is a cost associated with postponement because the production cost using postponement is typically

Accepted Answer

Postponement involves delaying some production activities until after customer orders have been received. This often requires holding inventory of partially-finished goods which increases inventory and holding costs. As a result, the production cost using postponement is typically higher than the production cost without it.

Question 17

Scenario 13.2 - Fish or Chicken
The taco stand in the atrium of the new College of Business building carried two items,fish tacos and chicken tacos.The fish tacos sell for $15 and are made out of $5 of ingredients and the chicken tacos sell for $10 and are made out of $4 of ingredients.Some days the taco stand owner has only chicken at his disposal,so he makes nothing but chicken tacos,and some days the opposite is true and he makes only fish tacos.Thus,he is able to estimate demand for chicken tacos at 2500 per day with a standard deviation of 600 and the demand for fish tacos at 2000 per day with a standard deviation of 500.Any fish or chicken tacos that do not sell at the end of the day can be sold for $1 each as bait.On days when both proteins are available,the taco stand manager prefers to make a few of each kind.All tacos are made in his home kitchen and then transported to campus.Due to time constraints and the capacity of his pickup truck bed,he is limited to beginning each day with only 3000 tacos.
-Suppose the taco stand manager could wake up a little earlier and borrow his buddy's full size pickup to transport tacos to campus.If time and capacity were not an issue,what would the expected profit be per day?

Accepted Answer

The answer of Scenario 13.2 - Fish or Chicken
The taco...

Question 18

Postponement is

Accepted Answer

Postponement is most effective when a small fraction of demand comes from a single product. This is because the strategy involves delaying customization until the last possible point in the supply chain, which can only be achieved if demand is spread out across multiple products. If a large portion of demand comes from a single product, it may not be practical to delay customization without causing delays or stockouts.

Question 19

________ may reduce overall profits for a firm if a single product contributes the majority of the demand.

Accepted Answer

Postponement involves delaying the finalization of a product until the actual demand is identified. In the case where a single product contributes the majority of the demand, if the firm fails to accurately forecast the demand, they could end up producing an excess of the product, resulting in inventory carrying costs and potentially decreasing profits. Utilizing postponement can help mitigate this risk by delaying the production of the product until demand is identified, reducing the likelihood of excess inventory and ultimately increasing overall profits.

Question 20

When a firm uses production with postponement to satisfy a part of its demand with the rest being satisfied without postponement,it is using

Accepted Answer

Tailored postponement refers to a strategy where a firm uses a combination of postponement and non-postponement methods to meet demand, customizing the approach based on specific needs.

Quiz 13: Linking Product Availability to Profits

As the standard deviation of forecast error increases,

When ordering a single product,it is optimal for the buyer to order the minimum of the available capacity and the optimal order quantity.When ordering multiple products,

The value of postponement decreases as

Postponement is valuable for a firm that

If quick response allows multiple orders in the season,

If quick response allows multiple orders in the season,

A company with multiple products that chooses to delay product differentiation until closer to the point of sale is using

As the number of order cycles per season increases,

A retailer places an order for the new Bagpipe 2018™ from the supplier and takes note of the demand pattern.They use this knowledge of the demand to place a second order of Bagpipe 2018 from the supplier.This results in

A retailer places an order for the new Bagpipe 2018™ from the supplier and takes note of the demand pattern.They use this knowledge of the demand to place a second order of Bagpipe 2018 from the supplier.This results in

Under tailored postponement,a firm produces the amount that is very likely to sell using

________ allows a firm to increase profits and better match supply and demand if the firm produces a large variety of products whose demand is unpredictable,not positively correlated,and is of about the same size.

As the total quantity for the season is broken up into multiple smaller orders,the buyer is better able to

Postponement may reduce overall profits for a firm if a single product contributes the majority of the demand because

There is a cost associated with postponement because the production cost using postponement is typically

Postponement is

________ may reduce overall profits for a firm if a single product contributes the majority of the demand.

When a firm uses production with postponement to satisfy a part of its demand with the rest being satisfied without postponement,it is using