Chapter 6

Question 1

What is Resource Planning?

Answer 1

The process of determining the production capacity required to meet demand.

Question 2

What problems can be caused due to capacity?

Answer 2

A missed due date or stock-out may cascade downstream, magnifying the bullwhip effect.

Question 3

What are the two types of operations planning?

Answer 3

Material Plans

Capacity Plans

Question 4

What is used for long-term planning?

Answer 4

Aggregate Production Plan (APP) (Greater than one-year planning horizon)

Question 5

What is used for Intermediate-range planning?

Answer 5

Master Production Schedule (MPS)(Six to eighteen months )

Question 6

What is used for Short-range planning?

Answer 6

Material Requirement Planning (MRP)(One day to less than six months)

Question 7

What is Hierarchical planning?

Answer 7

The process that translates annual business plans & demand forecasts into a production plan for a product family (products that share similar characteristics) in a plant or facility leading to the Aggregate Production Plan (APP).

Question 8

What are the goals of Aggregate Planning?

Answer 8

1. Meet demand
2. Use capacity efficiently
3. Meet inventory policy
4. Minimize cost
   –Labor
   –Inventory
   –Plant & equipment
   –Subcontract

Question 9

What is Chase Strategy?

Answer 9

Matching production to customer order rate by hiring and laying off employees.

Question 10

What is Level Strategy?

Answer 10

A stable workforce with constant output, inventory, and backlogs absorb fluctuations in demand.

Question 11

What costs are relevant to aggregate planning?

Answer 11

Direct and indirect labor costs and overtime
Inventory Holding Costs
Backordering Costs

Question 12

What are some advantages of chase strategy?

Answer 12

1. Minimum inventory (ok with small warehouses)

2. Varied production to meet sales requirements

Question 13

What are some disadvantages of chase strategy?

Answer 13

1. Costs of hiring, training, overtime, and extra shifts
2. Costs of layoffs and impact on employee morale
3. Possible unavailability of needed work skills
4. Maximum capacity needed

Question 14

What are some advantages of level strategy?

Answer 14

1. Smooth, level production avoids labor costs of demand matching
2. Retain employees and talent
3. Maintain quality

Question 15

What are some disadvantages of level strategy?

Answer 15

1. Buildup of inventory

2. Backorders can lead to negative consequences

Question 16

What is a combination strategy?

Answer 16

1. Produces at or close to full capacity for some part of the cycle
2. Produces at a lower rate (or does not produce) during the rest of the cycle
3. Makes use of available capacity, yet limits inventory buildup and inventory carrying costs

Question 17

What are the required external Inputs to the Production Planning System?

Answer 17

Competitors’ behavior
Raw material availability
Market demand
Economic conditions
External capacity

Question 18

What are the required internal Inputs to the Production Planning System?

Answer 18

Current physical capacity
Current workforce
Inventory levels
Activities required for production

Question 19

What are costs associated with changing the production rate?

Answer 19

Hiring, training, layoffs, temps

Question 20

What are the costs associated with inventory holding costs?

Answer 20

Costs of capital, storage, insurance, taxes, spoilage, obsolescence

Question 21

What are the costs associated with Backordering costs?

Answer 21

Expediting, loss of goodwill, lost sales due to stocking out

Question 22

What costs are more associated with chase strategy?

Answer 22

• Hiring and firing costs (chase)
• Training costs (chase)
• Subcontracting and Part-time labor costs (chase)

Question 23

What costs are more associated with level strategy?

Answer 23

• Inventory-carrying costs (level)
• Cost of stockout or back order (level)
• Overtime and undertime costs (level)

Question 24

What is the master production strategy?

Answer 24

A detailed disaggregation of the aggregate production plan, listing the exact end items to be produced by a specific period.

Question 25

In MPS, Quantities represent__________, not what can be produced

Answer 25

what needs to be produced

Question 26

APP vs MSP

Answer 26

APP(Product Groups) | MPS(Specific End Items)

Question 27

What is the time-phased plan?

Answer 27

Specifying how many and when the firm plans to build each end item

Question 28

What is system nervousness?

Answer 28

Small changes in the upper-level-production plan cause major changes in the lower-level production plan

Question 29

Firms use a time fence to deal with nervousness by separating the planning horizon into:

Answer 29

1. Firmed Segment(AKA demand time fence), from current period to several weeks into future. Can only be altered by senior management 2. Tentative segment (AKA planning time fence), from end of firmed segment to several weeks into the future

Question 30

What is Material Requirements Planning?

Answer 30

Is the logic for determining the number of parts, components, and materials needed to produce a product.