C215- Chapter 13

Question 1

Strategic Business Plan (SBP)

Answer 1

• top management gather info from departments
• provides company’s long-term direction and objectives for the next 2-10 years
• is the starting point for sales and operations planning
• states objectives for profitability, growth rate and return on investment.

Question 2

Marketing Plan

Answer 2

• Developed by marketing based on information shared with OP, FIN, and ENG.
• identifies markets to be served, profit margins, desired level of customer service, market share needed
• Identifies sales needed to meet objectives of SBP

Question 3

Sales and Operations Planning

Answer 3

• medium-range functional plans developed by marketing, operations, engineering and finance.
• brings together all the functional business plans into one integrated plan
• evaluates company’s performance throughout the year
• aligns supply chains to market demand

Question 4

What Is An Aggregate Plan (aka Production Plan)

Answer 4

• identifies resources needed during the next 6-18 months to support marketing plan

-•Decides on workforce size, inventory levels, and production rates.

• includes budgeted levels of finished products, inventory, backlogs, workforce size, aggregate production rates
• which enables planners to determine inventory to be held, overtime/undertime, subcontracting, hiring, firing, back-ordering of customer orders

Question 5

What Details does the Marketing Plan Entail (5)

Answer 5

-markets to be served
-desired levels of customer service
-product competitive advantage
-profit margins
-Market share

Question 6

Financial Plan

Answer 6

Focus on money: budgets, investments, cost targets, cash flow, funds, profits

Question 7

Engineering Plan

Answer 7

Identifies new products/modifications to existing products that are needed to support marketing plan

Question 8

Master Production Schedule

Answer 8

Anticipated production schedule for the company expressed in specific :
- configurations, quantities and dates.

• details how operations will use available resources and which units

Question 9

2 Aggregate Planning Options

Answer 9

1) Demand-Based : options that respond to demand fluctuations thorugh use of
2 Reactive options :
A. inventory
B. Back-orders

1 proactive option:
C. Shifting demand pattern

2) Capacity-Based : changes output to meet demand
- options that allow firm to change its current operating capacity
-overtime/undertime, subcontracting, hiring/firing

Question 10

Aggregate Planning : Demand-Based Options

1.Finished Goods Inventory
2. Back Orders
3. Shifting Demand

Answer 10

1. Using Finished Goods Inventory to absorb demand fluctuations
   - producing at average demand levels all year
   - increased inventory holding costs
2. Promising to deliver product to customer at a later date when demand can’t be met
   - if customer not willing to wait : lost sale
   - may lead to higher administrative costs (delivery)
3. Proactive approach trying to change consumer buying patterns by offering incentives
   - makes sense with high fixed cost but low variable costs

Question 11

Aggregate Planning Options : Capacity-Based Options

1. Overtime/Undertime
2. Subcontracting
3. Hiring/Firing

Answer 11

1. Short-term options for increasing/decreasing capacity
2. Medium-Longterm Option
   +: additional output without investing in additional tools
   - : cost, lose some degree of control.
3. Long-term options for increasing/decreasing capacity, can be expensive

Question 12

Evaluating Current Situation

Answer 12

1. Point of departure : % of normal capacity currently being used.
2. Magnitude of change : relative size of change needed
3. Duration of change : expected length of time for altered capacity level

Question 13

3 Aggregate Plan Strategies

1.Level

2.Chase

3.Hybrid

Answer 13

1. Level : produces same quantity each time period. Inventory and backorders are used to absorb demand fluctuations.
   +: workforce/labor force stability
   
   • : buildup of inventory; possible poor customer service from back orders
   • used with make-to-stock products
2. Chase : varies production to meet demand each period.
   +: minimizes finished goods holding costs
   
   • : constantly changing capacity needs, equipment to meet peak demand
   • used with make-to-order products
3. Hybrid : uses a combo of level & chase approaches
   Example : stable workforce supplemented by inventory buildup or OT production to meet demand
   Example : back-orders a portion of its demand

Question 14

5 Steps in Developing Aggregate Plan

Answer 14

1. Identify plan that matches company’s objectives
   - level : stable workforce
   - chase : outstanding customer service
   - hybrid : allows multiple objectives to be met
2. Determine aggregate production rate
   - level: rate = average demand
   - chase: calculate how much capacity needed each period; units produced regular time vs OT, subcontracted
3. Calculate Size of Workforce
   - Level : how many workers needed to achieve average production rate needed
   - Calculate how many workers are needed each period and make changes to workforce
4. Test aggregate plan & calculate costs
   - using production rate and initial workforce size, calculate inventory levels, expected hired/fired, need for OT.
5. Evaluate performance
   - in terms of cost, customer service, operations and Human Resources.