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Chapter 8Aggregate Planning in the Supply ChainTrue/False1. The goal of aggregate planning is to satisfy demand in a way that minimizes profit.Answer: FalseDifficulty: Easy2. 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.Answer: TrueDifficulty: Moderate3. Aggregate planning solves problems involving aggregate decisions rather than stock keeping unit (SKU) level decisions.Answer: TrueDifficulty: Easy4. Traditionally, much of aggregate planning is focused within an enterprise and may not always be seen as a part of supply chain management.Answer: TrueDifficulty: Moderate5. Aggregate planning is an important supply chain issue because, to be effective, it requires inputs from throughout the supply chain, but its results have little impact on the supply chain.Answer: FalseDifficulty: Moderate6. Short-term production serves as a broad blueprint for operations and establishes the parameters within which aggregate planning decisions are made.Answer: FalseDifficulty: Easy7. 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 firms profit over the planning horizon.Answer: TrueDifficulty: Moderate8. 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.Answer: TrueDifficulty: Easy9. A planning horizon is usually between three and five years.Answer: FalseDifficulty: Moderate10. A poor aggregate plan can result in improved sales and profits if the available inventory and capacity are unable to meet demand.Answer: FalseDifficulty: Easy11. A poor aggregate plan may result in a large amount of excess inventory and capacity, thereby raising costs.Answer: True Difficulty: Moderate12. The aggregate planner must make a trade-off between capacity, inventory, and backlog costs.Answer: TrueDifficulty: Moderate13. An aggregate plan that increases one cost typically results in the increase of the other two.Answer: FalseDifficulty: Moderate14. The time flexible strategy is 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.Answer: FalseDifficulty: Hard15. The time flexible strategy is where workforce (capacity) is kept stable but the number of hours worked is varied over time in an effort to synchronize production with demand.Answer: TrueDifficulty: Moderate16. The mixed strategy is where a stable machine capacity and workforce are maintained with a constant output rate with inventory levels fluctuating over time.Answer: FalseDifficulty: Hard17. Most strategies that an aggregate planner actually uses are in combination, and are referred to as mixed strategies.Answer: TrueDifficulty: Easy18. A highly effective tool for a company to use when it tries to maximize profits while being subjected to a series of constraints is aggregate programming.Answer: FalseDifficulty: Moderate19. To improve the quality of these aggregate plans, forecast errors must be taken into account when formulating aggregate plans.Answer: TrueDifficulty: Moderate20. Forecasting errors are dealt with in aggregate plans using either safety backlog or safety capacity.Answer: FalseDifficulty: Moderate21. Safety inventory is defined as inventory held to satisfy demand that is higher than forecasted.Answer: TrueDifficulty: Easy22. Safety capacity is defined as capacity used to satisfy demand that is lower than forecasted.Answer: FalseDifficulty: Easy23. Companies should work with downstream partners to produce forecasts and with upstream partners to determine constraints when doing aggregate planning.Answer: TrueDifficulty: Easy24. The aggregate plan should be viewed primarily as an in-house tool that does not need to be communicated to supply chain partners.Answer: FalseDifficulty: Easy25. 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.Answer: TrueDifficulty: Moderate26. A manager should perform sensitivity analysis on the inputs into an aggregate plan to choose the best solution for the range of possibilities that could occur.Answer: TrueDifficulty: Moderate27. As inputs into the aggregate plan change, managers do not need to make changes to the aggregate plan.Answer: FalseDifficulty: Easy28. As capacity utilization increases, it becomes less important to perform aggregate planning.Answer: FalseDifficulty: ModerateMultiple Choice1. The process by which a company determines levels of capacity, production, subcontracting, inventory, stockouts, and even pricing over a specified time horizon isa. aggregate planning.b. detail planning.c. inventory planning.d. sales planning.e. all of the aboveAnswer: aDifficulty: Moderate2. The goal of aggregate planning is toa. dissatisfy customers in a way that maximizes profit.b. dissatisfy customers in a way that minimizes profit.c. satisfy demand in a way that maximizes profit.d. satisfy demand in a way that minimizes profit.e. none of the aboveAnswer: cDifficulty: Easy3. Aggregate planning solves problems involvinga. 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.e. b and c onlyAnswer: cDifficulty: Easy4. Aggregate planning, to be effective, requires inputs froma. all customers.b. all departments.c. all suppliers.d. throughout the supply chain.e. throughout the company.Answer: dDifficulty: Moderate5. Much of aggregate planning has traditionally been focuseda. on short-term production scheduling.b. on customer relationship management.c. within an enterprise.d. beyond enterprise boundaries.e. all of the aboveAnswer: cDifficulty: Moderate6. Which of the following are not operational parameters the aggregate planner is concerned with? a. production rateb. workforcec. overtimed. backorderse. inventory on handAnswer: dDifficulty: Moderate7. The operational parameter concerned with the number of units completed per unit time (such as per week or per month) isa. production rate.b. workforce.c. overtime.d. backlog.e. inventory on hand.Answer: aDifficulty: Easy8. The operational parameter concerned with the number of workers/units of capacity needed for production isa. production rate.b. workforce.c. overtime.d. backlog.e. inventory on hand.Answer: bDifficulty: Easy9. The operational parameter concerned with the amount of overtime production planned isa. production rate.b. workforce.c. overtime.d. backlog.e. inventory on hand.Answer: cDifficulty: Easy10. The operational parameter concerned with demand not satisfied in the period in which it arises, but carried over to future periods isa. production rate.b. workforce.c. overtime.d. backlog.e. inventory on hand.Answer: dDifficulty: Easy11. The operational parameter concerned with the planned inventory carried over the various periods in the planning horizon isa. production rate.b. workforce.c. overtime.d. backlog.e. inventory on hand.Answer: eDifficulty: Easy12. The operational parameter concerned with the number of units of machine capacity needed for production isa. machine capacity level.b. subcontracting.c. overtime.d. backlog.e. inventory on hand.Answer: aDifficulty: Easy13. The operational parameter concerned with the subcontracted capacity required over the planning horizon isa. machine capacity level.b. subcontracting.c. overtime.d. backlog.e. inventory on hand.Answer: cDifficulty: Easy14. The aggregate plana. serves as a broad blueprint for operations.b. establishes the parameters within which short-term production and distribution decisions are made.c. allows the supply chain to alter capacity allocations and change supply contracts.d. all of the abovee. b and c onlyAnswer: dDifficulty: Moderate15. 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, staffing level, and capacity for each period.e. none of the aboveAnswer: cDifficulty: Moderate16. To create an aggregate plan, a company must specifya. the planning horizon for the plan.b. the duration of each period within the planning horizon.c. key information required.d. all of the abovee. a and b onlyAnswer: dDifficulty: Moderate17. The planning horizon isa. 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.e. none of the aboveAnswer: aDifficulty: Easy18. The length of the planning horizon is usually between a. one and three months.b. three and eighteen months.c. one and three years.d. three and five years.e. none of the aboveAnswer: bDifficulty: Moderate19. Which of the following is not information needed by the aggregate planner?a. demand forecast for each period in the planning horizonb. production costsc. labor costsd. cost of subcontracting productione. cost of changing the demand forecastAnswer: eDifficulty: Moderate20. The cost of changing capacity includes thea. cost of adding machine capacity.b. cost of reducing machine capacity.c. cost of hiring workforce.d. cost of laying off workforce.e. all of the aboveAnswer: eDifficulty: Easy21. Which of the following is not a cost of changing capacity?a. cost of adding machine capacityb. cost of hiring workforcec. cost of laying off workforced. cost of overtimee. cost of reducing machine capacityAnswer: dDifficulty: Moderate22. Which of the following is not a constraint the aggregate planner needs to consider?a. limits on stockouts and backlogsb. limits on overtimec. limits on sales commissionsd. limits on layoffse. limits on capital availableAnswer: cDifficulty: Moderate23. A poor aggregate plan can result ina. appropriate inventory levels.b. efficient use of capacity.c. better sales and lost profits.d. lost sales and lost profits.e. lost sales and better profits.Answer: dDifficulty: Hard24. The fundamental trade-offs available to an aggregate planner are betweena. capability, inventory, and backlog costs.b. capability, inventory, and sales costs.c. capacity, inventory, and backlog costs.d. capacity, inventory, and sales costs.e. none of the aboveAnswer: cDifficulty: Easy25. Which of the following is not a distinct aggregate planning strategy for achieving balance between capacity, inventory, and backlog costs?a. adjustable strategyb. Chase strategyc. level strategyd. mixed strategye. time flexible strategyAnswer: aDifficulty: Easy26. 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 thea. adjustable strategy.b. Chase strategy.c. level strategy.d. mixed strategy.e. time flexible strategy.Answer: bDifficulty: Moderate27. 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 thea. adjustable strategy.b. Chase strategy.c. level strategy.d. mixed strategy.e. time flexible strategy.Answer: eDifficulty: Moderate28. The strategy where a stable machine capacity and workforce are maintained with a constant output rate, with inventory levels fluctuating over time, is thea. adjustable strategy.b. Chase strategy.c. level strategy.d. mixed strategy.e. time flexible strategy.Answer: cDifficulty: Hard29. Most strategies that an aggregate planner actually uses are in combination and are referred to as thea. adjustable strategy.b. Chase strategy.c. level strategy.d. mixed strategy.e. time flexible strategy.Answer: dDifficulty: Easy30. A highly effective tool for a company to use when it tries to maximize profits while being subjected to a series of constraints isa. aggregate programming.b. distribution programming.c. production programming.d. linear programming.e. manufacturing programming.Answer: dDifficulty: Moderate31. 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.e. none of the aboveAnswer: bDifficulty: Moderate32. Forecasting errors are dealt with usinga. safety backlog.b. safety capacity.c. safety inventory.d. all of the abovee. b and c onlyAnswer: eDifficulty: Moderate33. Inventory held to satisfy demand that is higher than forecasted isa. safety backlog.b. safety capacity.c. safety inventory.d. safety sales.e. safety workforce. Answer: cDifficulty: Easy34. Capacity used to satisfy demand that is higher than forecasted isa. safety backlog.b. safety capacity.c. safety inventory.d. safety sales.e. safety workforce.Answer: bDifficulty: Easy35. Which of the following is an approach a company can use to create a buffer for forecast error using safety inventory?a. overtimeb. carry extra workforce permanentlyc. build and carry extra inventoriesd. subcontractinge. purchase capacity or product from an open or spot marketAnswer: aDifficulty: Easy36. Which of the following is not an approach a company can use to create a buffer for forecast error using safety capacity?a. overtimeb. carry extra workforce permanentlyc. build and carry extra inventoriesd. subcontractinge. purchase capacity or product from an open or spot marketAnswer: cDifficulty: Easy37. Aggregate planning should consider information froma. only the enterprise as its breadth of scope.b. downstream partners to produce forecasts.c. upstream partners to determine constraints.d. all of the abovee. b and c onlyAnswer: dDifficulty: Easy38. The quality of the aggregate plan can be improved by using information froma. only the local firm.b. only downstream partners.c. only upstream partners.d. all parts of the supply chain.e. none of the aboveAnswer: bDifficulty: Moderate39. The aggregate plan should be communicated toa. only the local firm.b. only downstream partners.c. only upstream partners.d. all supply chain partners who will be affected by it.e. none of the aboveAnswer: cDifficulty: Moderate40. The aggregate plan needs toa. 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.e. none of the aboveAnswer: cDifficulty: Moderate41. How frequently should the aggregate plan be rerun?a. weeklyb. monthlyc. every 3 to 8 monthsd. as inputs to the aggregate plan changee. neverAnswer: dDifficulty: Hard42. 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.e. none of the aboveAnswer: bDifficulty: ModerateEssay/Problems1. Discuss the primary objective and operational parameters of aggregate planning.Answer: The goal of aggregate planning is to satisfy demand in a way that maximizes profit. 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. The aggregate planners main objective is to identify the following operational parameters over the specified time horizon: Production rate: the number of units completed per unit time (such as per week or per month). Workforce: the number of workers/units of capacity needed for production. Overtime: the amount of overtime production planned. Machine capacity level: the number of units of machine capacity needed for production. Subcontracting: the subcontracted capacity required over the planning horizon. Backlog: demand not satisfied in the period in which it arises but carried over to future periods. Inventory on hand: the planned inventory carried over the various periods in the planning horizon.The aggregate plan serves as a broad blueprint for operations and establishes the parameters within which short-term production and distribution decisions are made. The aggregate plan allows the supply chain to alter capacity allocations and change supply contracts.Difficulty: Moderate2. Discuss the information required for aggregate planning.Answer: An aggregate planner requires the following information: Demand forecast F t for each Period t in the planning horizon that extends over T periods Pr
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