Deck 8: Aggregate Planning in a Supply Chain

Question 1

Safety inventory is defined as inventory held to satisfy demand that is higher than forecasted.

Answer 1

False

Question 2

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 2

True

Question 3

A poor aggregate plan can result in improved sales and profits if the available inventory and capacity are unable to meet demand.

Answer 3

False

Question 4

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.

Question 5

An aggregate plan that increases one cost typically results in the increase of the other two.

Question 6

The goal of aggregate planning is to satisfy demand in a way that minimizes profit.

Question 7

Aggregate planning solves problems involving aggregate decisions rather than stock keeping unit (SKU)level decisions.

Question 8

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.

Question 9

A planning horizon is usually between three and five years.

Question 10

A poor aggregate plan may result in a large amount of excess inventory and capacity,thereby raising costs.

Question 11

The aggregate planner must make a trade-off between capacity,inventory,and backlog costs.

Question 12

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 firm's profit over the planning horizon.

Question 13

Traditionally,much of aggregate planning is focused within an enterprise and may not always be seen as a part of supply chain management.

Question 14

Most strategies that an aggregate planner actually uses are in combination,and are referred to as hybrid strategies.

Question 15

Safety capacity is defined as capacity used to satisfy demand that is lower than forecasted.

Question 16

Forecasting errors are dealt with in aggregate plans using either safety backlog or safety capacity.

Question 17

Short-term production serves as a broad blueprint for operations and establishes the parameters within which aggregate planning decisions are made.

Question 18

To improve the quality of these aggregate plans,forecast errors must be taken into account when formulating aggregate plans.

Question 19

Companies should work with downstream partners to produce forecasts and with upstream partners to determine constraints when doing aggregate planning.

Question 20

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.

Question 21

The operational parameter concerned with demand not satisfied in the period in which it arises,but carried over to future periods is

A) production rate.
B) workforce.
C) overtime.
D) backlog.
E) inventory on hand.

Question 22

The goal of aggregate planning is to build a plan that satisfies demand while maximizing profit.

Question 23

Aggregate planning solves problems involving

A) 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 only

Question 24

The operational parameter concerned with the number of units of machine capacity needed for production is

A) machine capacity level.
B) subcontracting.
C) overtime.
D) backlog.
E) inventory on hand.

Question 25

The operational parameter concerned with the number of units completed per unit time (such as per week or per month)is

A) production rate.
B) workforce.
C) overtime.
D) backlog.
E) inventory on hand.

Question 26

Aggregate planning,to be effective,requires inputs from

A) all customers.
B) all departments.
C) all suppliers.
D) throughout the supply chain.
E) throughout the company.

Question 27

As capacity utilization increases,it becomes less important to perform aggregate planning.

Question 28

Aggregate planning is a process by which a company determines planned levels of capacity,production,subcontracting,inventory,stockouts,and even pricing over a specified time horizon.

Question 29

The operational parameter concerned with the planned inventory carried over the various periods in the planning horizon is

A) production rate.
B) workforce.
C) overtime.
D) backlog.
E) inventory on hand.

Question 30

The goal of aggregate planning is to

A) 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 above

Question 31

Linear programming finds the solution that creates the highest profit while satisfying the constraints that a company faces.

Question 32

Much of aggregate planning has traditionally been focused

A) on short-term production scheduling.
B) on customer relationship management.
C) within an enterprise.
D) beyond enterprise boundaries.
E) all of the above

Question 33

Linear programming finds the solution that creates the highest profit while satisfying most of the constraints that a company faces.

Question 34

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.

Question 35

The operational parameter concerned with the amount of overtime production planned is

A) production rate.
B) workforce.
C) overtime.
D) backlog.
E) inventory on hand.

Question 36

The operational parameter concerned with the number of workers/units of capacity needed for production is

A) production rate.
B) workforce.
C) overtime.
D) backlog.
E) inventory on hand.

Question 37

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.

Question 38

The goal of aggregate planning is to build a plan that satisfies demand while minimizing downtime.

Question 39

The process by which a company determines levels of capacity,production,subcontracting,inventory,stockouts,and even pricing over a specified time horizon is

A) aggregate planning.
B) detail planning.
C) inventory planning.
D) sales planning.
E) all of the above

Question 40

As inputs into the aggregate plan change,managers do not need to make changes to the aggregate plan.

Question 41

Which of the following is not a cost of changing capacity?

A) Cost of adding machine capacity
B) Cost of hiring workforce
C) Cost of laying off workforce
D) Cost of overtime
E) Cost of reducing machine capacity

Question 42

The planning horizon is

A) 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.

Question 43

Most strategies that an aggregate planner actually uses are in combination and are referred to as the

A) adjustable strategy.
B) Chase strategy.
C) level strategy.
D) mixed strategy.
E) time flexible strategy.

Question 44

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.

Question 45

Inventory held to satisfy demand that is higher than forecasted is

A) safety backlog.
B) safety capacity.
C) safety inventory.
D) safety sales.
E) safety workforce.

Question 46

Which of the following is not a distinct aggregate planning strategy for achieving balance between capacity,inventory,and backlog costs?

A) Adjustable strategy
B) Chase strategy
C) Level strategy
D) Mixed strategy
E) Time flexible strategy

Question 47

Which of the following is an approach a company can use to create a buffer for forecast error using safety inventory?

A) Overtime
B) Carry extra workforce permanently
C) Build and carry extra inventories
D) Subcontracting
E) Purchase capacity or product from an open or spot market

Question 48

Which of the following is not a constraint the aggregate planner needs to consider?

A) Limits on stockouts and backlogs
B) Limits on overtime
C) Limits on sales commissions
D) Limits on layoffs
E) Limits on capital available

Question 49

Which of the following is not information needed by the aggregate planner?

A) Demand forecast for each period in the planning horizon
B) Production costs
C) Labor costs
D) Cost of subcontracting production
E) Cost of changing the demand forecast

Question 50

Forecasting errors are dealt with using

A) safety backlog.
B) safety capacity.
C) safety inventory.
D) all of the above
E) B and C only

Question 51

The operational parameter concerned with the subcontracted capacity required over the planning horizon is

A) machine capacity level.
B) subcontracting.
C) overtime.
D) backlog.
E) inventory on hand.

Question 52

The strategy where a stable machine capacity and workforce are maintained with a constant output rate,with inventory levels fluctuating over time,is the

A) adjustable strategy.
B) Chase strategy.
C) level strategy.
D) mixed strategy.
E) time flexible strategy.

Question 53

A poor aggregate plan can result in

A) 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.

Question 54

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 the

A) adjustable strategy.
B) Chase strategy.
C) level strategy.
D) mixed strategy.
E) time flexible strategy.

Question 55

The fundamental trade-offs available to an aggregate planner are between

A) capability, inventory, and backlog costs.
B) capability, inventory, and sales costs.
C) capacity, inventory, and backlog costs.
D) capacity, inventory, and sales costs.

Question 56

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 the

A) adjustable strategy.
B) Chase strategy.
C) level strategy.
D) mixed strategy.
E) time flexible strategy.

Question 57

A highly effective tool for a company to use when it tries to maximize profits while being subjected to a series of constraints is

A) aggregate programming.
B) distribution programming.
C) production programming.
D) linear programming.
E) manufacturing programming.

Question 58

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.

Question 59

Capacity used to satisfy demand that is higher than forecasted is

A) safety backlog.
B) safety capacity.
C) safety inventory.
D) safety sales.
E) safety workforce.

Question 60

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.

Question 61

A ________ is the time period over which the aggregate plan is to produce a solution-usually between 3 and 18 months.

A) planning horizon
B) time window
C) look ahead
D) freeze window

Question 62

Which of the following is not an approach a company can use to create a buffer for forecast error using safety capacity?

A) Overtime
B) Carry extra workforce permanently
C) Build and carry extra inventories
D) Subcontracting
E) Purchase capacity or product from an open or spot market

Question 63

Aggregate planning should consider information from

A) only the enterprise as its breadth of scope.
B) downstream partners to produce forecasts.
C) upstream partners to determine constraints.
D) all of the above
E) B and C only

Question 64

Which of the following is not one of the fundamental trade-offs available to a planner?

A) Capacity (regular time, overtime, subcontracted)
B) Inventory
C) Warehouse availability
D) Backlog/lost sales because of delay

Question 65

Which is not reasonable when implementing aggregate planning in practice?

A) Think beyond the enterprise to the entire supply chain.
B) Make plans flexible, because most forecasts are accurate.
C) Rerun the aggregate plan as new data emerge.
D) Use aggregate planning as capacity utilization increases.

Question 66

How frequently should the aggregate plan be rerun?

A) Weekly
B) Monthly
C) Every 3 to 8 months
D) As inputs to the aggregate plan change

Question 67

Which of the following is not a dimension along which IT can add value in the aggregate planning realm?

A) The ability to handle large problems
B) The ability to handle complex problems
C) The ability to guarantee optimal solutions
D) The ability to interact with other core IT systems

Question 68

Discuss the information required for aggregate planning.

Question 69

Explain the basic strategies that an aggregate planner has available to balance the various costs and meet demand.

Question 70

The quality of the aggregate plan can be improved by using information from

A) only the local firm.
B) only downstream partners.
C) only upstream partners.
D) all parts of the supply chain.
E) none of the above

Question 71

Discuss the primary objective and operational parameters of aggregate planning.

Question 72

________ is used to determine customer service levels.

A) Inventory held
B) Backlog/stockout quantity
C) Workforce hired/laid off
D) Machine capacity increase/decrease

Question 73

The aggregate plan needs to

A) 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.

Question 74

The aggregate plan should be communicated to

A) 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 above

Question 75

Discuss key issues to be considered when implementing aggregate planning.

Question 76

An aggregate planner requires information on constraints.Which of the following is one of the typical constraints for an aggregate planner?

A) Inventory holding cost
B) Labor/machine hours required per unit
C) Stockout or backlog cost
D) Limits on overtime

Question 77

There are essentially three distinct aggregate planning strategies for achieving balance between costs.Which of the following is not one of these?

A) Chase strategy-using capacity as the lever
B) Flexibility strategy-using utilization as the lever
C) Level strategy-using inventory as the lever
D) Response strategy-using utilization as the lever

Question 78

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.