Chapter 4: Capacity Management and Aggregate Production Planning

CHAPTER 4: CAPACITY MANAGEMENT AND AGGREGATE PRODUCTION PLANNING

TRUE/FALSE

1.  Actual capacity is the greatest throughput rate that can be achieved with the existing configuration of resources and the accepted product or service mix plans.

ANS: T

2.  E is the efficiency with which utilization U can be employed to make different kinds of products.

ANS: F

3.  E, the efficiency, is a proportional factor used to convert units of throughput to standard time.

ANS: T

4.  Unexplained fluctuations in capacity are unpleasant but profitable.

ANS: F

5.  Shutting down the production system for 2 hours of an 8-hour day does not affect the measure U, which remains at 100 percent.

ANS: F

6.  The ability to contain or store inventory is a well-received measure of capacity.

ANS: T

7.  Operations capacity describes how many units can be supplied per unit of time.

ANS: T

8.  The two kinds of capacity situations (extra- and under-) have a trade-off relationship.

ANS: T

9.  When market demand falls below maximum supply capacity, an inventory buildup can be used to help meet that demand if backordering is prohibited.

ANS: F

10.  Backorders can be used to postpone satisfying demand when there is no inventory available.

ANS: T

11.  Capacity as measured by maximum output volume per unit of time (or max throughput rate) comes closest to capturing the P/OM concept.

ANS: T

12.  Capacity management relates to how the equipment, people, and materials of the existing system are used.

ANS: T

13.  Aggregate planning is a method used to design a generalized production schedule.

ANS: T

14.  The reason that the term “aggregation” is used is because the specific identities of only some of the units are merged into a common pool of standard units or standard hours.

ANS: F

15.  Aggregate planning is an external (strategic) production management function as compared to an internal (tactical) function.

ANS: F

16.  The driver of AP (aggregate planning) is forecasted customer demand in standard units.

ANS: T

17.  Workforce planning is readily accomplished by AP but it is strictly manufacturing and not important to service industries.

ANS: F

18.  Intermittent flow shops may be preferred because of lumpy demand levels (rather than constant demand levels) over time.

ANS: T

19.  Aggregate planning lumps various items together so that the sum reflects aggregate demand. The items to be aggregated must share supply commonalities. There is no point in aggregating jobs that cannot be made at the same facilities.

ANS: T

20.  The second level of production scheduling consists of assigning jobs to departments that have been equipped and staffed according to the aggregate plan.

ANS: T

21.  Overstaffing seldom places burdens on the human resources managers who have to deal with personnel needs and the long-term repercussions of asking people to leave without notice.

ANS: F

22.  By varying the size of the workforce, production output can be made to match demand if facilities and equipment allow.

ANS: T

23.  Buyers who refuse to accept backorders create the situation called fill or kill. In that case, the cost of a backorder is a lost sale at the minimum and possibly the loss of a customer over a long purchasing period.

ANS: T

24.  Market research indicates that consumers of cosmetics and makeup will travel far and wide to find the lipstick brand and color to which they are loyal. This is equivalent to a fill and kill situation.

ANS: T

25.  Forecasts of demand are subject to statistical variability. Demand cannot be predicted perfectly without a contract.

ANS: T

26.  When calculating the costs of level production, it should be remembered that cumulative inventory is the measure of actual stock on-hand. During a period of time when demand continuously exceeds supply, this net stock on-hand cannot fall below zero.

ANS: F

27.  Workforce planning is directly related to the control of inventories based on forecasts of supply.

ANS: F

28.  Flexible workforce size is better fitted to the configuration of job shops and batch production than it is to flow shop production.

ANS: T

29.  Workforce size is a variable that is often a function of the volume of business, revenues, and profits. These factors play a part in determining inputs to forecasts for AP modeling.

ANS: T

MULTIPLE CHOICE

1.  Lack of orders or breakdowns of productive systems will diminish

a. / T. / c. / E.
b. / U. / d. / T ´ E.

ANS: B

2.  _____ is applied as a proportional correction to standard time when there are supply chain disruptions.

a. / T (real time available) / c. / U (utilization)
b. / E (efficiency) / d. / C (actual capacity)

ANS: C

3.  Many companies prefer to have capacity in reserve and expect to operate effectively _____ the misleading ideal of _____ percent utilization.

a. / below; 100 / c. / below; 75
b. / above; 75 / d. / above; 100

ANS: A

4.  The definition that best fits capacity is

a. / the capacity to make goods and/or provide services.
b. / the minimum sustained output of goods and/or services.
c. / the capacity to contain or store inventory.
d. / both a and c
e. / both b and c

ANS: D

5.  If the maximum capacity of the process is _____ the peak demand, knowing how to assign priorities will influence real capacity levels achieved.

a. / equal to / c. / less than
b. / greater than / d. / much greater than

ANS: C

6.  Capacity planning involves not only machinery and _____, but also _____.

a. / labor; management / c. / training; vendor management
b. / employees’ motivation; materials / d. / all of the above

ANS: D

7.  As throughput volume gets larger, what factors operate to make the process more efficient?

a. / workers learn to do their jobs better
b. / it takes less time
c. / more work gets turned out in a time period
d. / costs decrease
e. / all of the above

ANS: E

8.  Capacity decisions must have three elements in place:

a. / managerial support, market rationalization, and P/OM knowledge.
b. / P/OM knowledge, market rationalization, and financial support.
c. / market rationalization, HRM support, and P/OM knowledge.
d. / financial support, market rationalization, and managerial support.

ANS: B

9.  Stockless materials management systems are basically _____ managed inventory systems where a third party manages all or part of the supplies.

a. / marketing / c. / customer
b. / vendor / d. / accounting

ANS: B

10.  _____ is determined by calculating the amount of time that is available when fully utilizing the resources that are already in place to make and deliver product throughputs. Doubling the number of machines doubles the amount of available time.

a. / T / c. / E
b. / U / d. / C

ANS: A

11.  Machines and people that work _____ have lower efficiency than those that have a _____ productive output.

a. / slower; higher / c. / faster; higher
b. / slower; lower / d. / faster; lower

ANS: A

12.  If a job is being done at 90 percent of the standard time because a supplier has delivered a defective product, _____ action must be taken with supplies on hand and the problem must be corrected with future deliveries.

a. / no / c. / positive
b. / remedial / d. / utilization forecasting

ANS: B

13.  The overloaded system does not have to turn away orders if the customer agrees to wait until other customers’ jobs are finished. When no current inventory is available, these _____ must wait until supply catches up with demand.

a. / work-in-process / c. / raw materials
b. / finished goods / d. / back orders

ANS: D

14.  If the _____ capacity of a process is less than the peak demand, knowing how to assign priorities will influence real capacity levels achieved.

a. / maximum / c. / rated
b. / minimum / d. / observed

ANS: A

15.  A potential backup supplier who can make up an emergency shortfall in materials is needed. Having this supplier in place before the shortage occurs is known as _____ planning.

a. / strategic / c. / short-term
b. / long-term / d. / contingency

ANS: D

16.  The specific purpose of _____ is to schedule production for the job shop.

a. / aggregate planning / d. / planning horizons
b. / detailed schedules / e. / disaggregate planning
c. / strategic business plans

ANS: A

17.  The_____ is the producer’s general plan for getting work done.

a. / company plan / c. / detailed schedule
b. / aggregate plan / d. / strategic plan

ANS: B

18.  Before trying to do detailed, tactical scheduling, _____ should be used to avoid costly mistakes arising from not being prepared with the proper resources at the right time.

a. / company planning / d. / strategic planning
b. / production scheduling / e. / enterprise planning
c. / aggregate planning

ANS: C

19.  _____ is (are) generated by a variety of customers for the different kinds of products made by the job shop or the different kinds of services offered by job shops.

a. / Supply / d. / Production plans
b. / Aggregate plans / e. / Information
c. / Demand

ANS: C

20.  _____ is achieved by collecting and lumping all items to be produced together.

a. / Strategic planning / c. / Company planning
b. / Detailed scheduling / d. / Aggregate planning

ANS: D

21.  Aggregate-planning methods can derive better solutions when P/OM can develop

a. / ways to expand the number of different products that can be made by a specific set of resources.
b. / ways to convert strategies into tactics.
c. / ways to expand the number of resources that can make a class of products.
d. / both a and c
e. / both a and b

ANS: D

22.  Because many job shops provide services and not goods, it pays to emphasize the fact that AP is useful to _____ kinds of job shops.

a. / most / c. / specific
b. / both / d. / many

ANS: B

23.  Which level of production planning requires a forecast?

a. / first level (aggregate planning) / c. / third level (sequencing)
b. / second level (loading) / d. / fourth level (LP planning)

ANS: A

24.  Which variables are relevant production factors of aggregate planning?

a. / demand aggregated over time / d. / workforce level
b. / supply aggregated over time / e. / all of the above
c. / overtime production

ANS: E

25.  To justify the _____, the sum of costs associated with a constant workforce must be less than the sum of costs associated with a variable workforce.

a. / chasing policy / c. / hybrid policy
b. / constant production strategy / d. / combination strategy

ANS: B

26.  Backordered work is shown as

a. positive inventory. c. cumulative inventory.

b. negative inventory. d. rework.

ANS: B

27.  What business product lines have customers with ordering behaviors called fill or kill?

a. / video and music tapes / d. / none of the above
b. / lipstick and cosmetics / e. / all of the above
c. / caviar and champagne

ANS: E

28.  For the slightly chasing policy model (C1) backorders cost $100 per occurrence, costs for carrying inventory are $25 per unit, hires cost $200 per instance, and reductions cost $300 per event - all occurring within the time period. Then, total variable cost TVC (C1) is

a. / $12,800 / c. / $22,800
b. / $5,800 / d. / $12,925

ANS: A

29.  Workforce adjustment costs and _____ costs trade off between each other.

a. / minimum total / c. / lean production
b. / inventory/backorder / d. / smoothing demand

ANS: B

30.  The specific purpose of AP is to decide

a. / when to schedule work.
b. / under what conditions to schedule work.
c. / what to forecast for demand.
d. / both a and b

ANS: D

31.  Aggregate planning starts a chain reaction in the supply chain, which is best described by

a. / producers to customers to suppliers.
b. / customers to producers to suppliers.
c. / suppliers to producers to customers.
d. / producers to suppliers to customers.

ANS: C

32.  Material flows inside the company can be scheduled in detail for specific items, or in

a. / random allocation. / c. / both a and b
b. / categories of specific items. / d. / neither a nor b

ANS: B

33.  Aggregation methods for scheduling farming (harvesting) activities have useful _____ to service and manufacturing applications. The _____ can be accounted for at a later time.

a. / similarities; differences
b. / differences; similarities
c. / transformation analogies; outputs
d. / forecast similarities; product schedules

ANS: A

34.  Aggregate planning is achieved by _____ all items to be produced together.

a. / collecting / c. / both a and b
b. / lumping / d. / averaging

ANS: C

35.  Because many job shops provide services and not goods, it pays to emphasize the fact that:

a. / AP is useful to all kinds of job shops.
b. / AP is only useful to service providers.
c. / AP is only useful to goods providers.
d. / AP is not useful to all brands of jobs shops.

ANS: A