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BUSOBA 3230 Exam 2

Terms in this set (103)

In a recent post, it was indicated that Tesla currently has the capacity to build 90k Model S/X and 400k Model 3/Y in Fremont, California, with an additional 150k capacity for Model 3s in Shanghai. Which of the following are true? (select all that are correct)

These are input measures

They indicate the number of cars needed to break-even

These are productivity measures

These are output measures

They indicate the maximum number of cars that can be produced per year

They indicate the maximum utilization rate
These are output measures

They indicate the maximum number of cars that can be produced per year
Consider two generic strategies for expanding capacity:

(1) small, frequent increases
(2) larger, infrequent increases

Match industry examples with typical capacity expansion strategies and their associated risks.

i. Apple
ii. Charmin
Apple- larger, infrequent increases

Charmin- small, frequent increases
Typically speaking, how are capital intensity, fixed costs, and economies of scale related?
Higher capital intensity = greater fixed costs = greater opportunities of economies of scale
Match the industry example with the typical demand uncertainty and capacity cushions.

restaurant
automotive industry
restaurant - high demand uncertainty, high capacity cusion

automotive - lower demand uncertanty, lower capacity cushion
Southwest airlines has set utilization at 60% in response to COVID-19 pandemic. If an airplane has 100 seats, how many seats will be sold?
60
When lead time, L = 0 and demand is constant, the reorder point (ROP or R) = _______units.
0
When is Q (order quantity) optimal?
annual holding cost = annual ordering cost
When lead time > 0 & constant and demand is constant, reorder point (ROP or R) =
R=dL
When lead-time > 0 and demand is NOT constant, reorder point (ROP or R) =
R=dL + SS
Finding the overall capacity level of capital-intensive resources to best support the firm's long-term strategy.
Strategic capacity planning
The output that a system is capable of achieving over a period of time.
Capacity
Measure of how close the firm's current output rate is to its best operating level (percent).
Capacity Utilization Rate
Idea that as the plant gets larger and volume increases, the average cost per unit drops. At some point, the plant gets too large and cost per unit increases.
Economies of Scale
When multiple products can be produced at lower cost in combination than they can be separately.
Economies of Scope
All the money that the system has invested in purchasing things it intends to sell (Goldratt's definition)
Inventory
The demands for these items are unrelated to each other, or to activities that can be predicted with certainty.
Independent demand
The need for an item is a direct result of the need for some other item, usually an item of which it is a part. Also, when the demand for the item can be predicted with accuracy due to a schedule or specific activitity.
Dependent Demand
An inventory control model where the amount requisitioned is fixed and the actual ordering is triggered by inventory dropping to a specified level of inventory.
Fixed-order quantity model (Q-model)
The amount on hand plus on-order minus backordered quantities. In the case where inventory has been allocated for special purposes, the inventory position is reduced by these allocated amounts.
Inventory Position
This order size minimizes total annual cost.
Optimal order quantity (Qopt)
An order is placed when inventory drops to this level.
Reorder Point (R)
The amount of inventory carried in addition to the expected demand.
Safety Stock
A measure of the expected number of times inventory is replaced over a year.
Inventory Turn
Divides inventory into dollar volume categories that map into strategies appropriate for the category.
ABC inventory classification
The development and management of supplier relationships to acquire goods and services in a way that aids in achieving the needs of a business.
Strategic sourcing
A process suitable for procuring products that are strategically important to the firm.
Sourcing
When a customer allows the supplier to manage the inventory policy of an item or group of items.
Vendor-managed inventory
A program for automatically supplying groups of items to a customer on a regular basis.
Continuous replenishment
Staples that people buy in a wide range of retail outlets, such as grocery stores and gas stations.
Functional products
Products such as fashionable clothes and personal computers that typically have a life cycle of just a few months.
Innovative products
Moving some of a firm's internal activities and decision responsibility to outside providers.
Outsourcing
Practice where a single entity controls the entire process of a product, from the raw materials to distribution
Vertical Integration
A measure of supply chain efficiency.
inventory turnover
The annual cost for a company to produce the goods or services provided to customers.
Cost of Goods sold
The average total value of all items held in inventory for the firm, valued at cost
Average aggregate inventory value
Preferred measure of supply chain efficiency that is mathematically the inverse of inventory turnover times 52.
Weeks of supply
Which of the following are true about the importance of supply chain management? (Select all that apply)

Supply chain management directly impacts cost, quality, and availability of raw materials

Good supply chain management eliminates forecast errors

Supply chain management directly impacts inventory turnover and return on assets

Good supply chain management can eliminate global supply chain risk
Supply chain management directly impacts cost, quality, and availability of raw materials

Supply chain management directly impacts inventory turnover and return on assets
Match the following products with their product type and most applicable supply chain strategy:

Trendy Clothes

A loaf of bread
Trendy Clothes: Innovative product and responsive supply chain

A loaf of bread: Functional Product and Efficient Supply Chain
Made-to-Stock (MTS) strategies typically use continuous flow, line, or large batch processes in order to...

focus on cost efficiency and speed of delivery..

focus on customization and variety.

the focus is on minimizing time between orders.

focus is on responsiveness and development speed..
focus on cost efficiency and speed of delivery..
In supply chains, inventory held "upstream" can result in lower aggregate average inventory values because transformational "value adding" processes have not yet been performed. On the other hand, it is sometimes moved "downstream" closer to the customer (forward placement) in order to:

Reduce inventory costs

Reduce risk of bullwhip effect

Increase return on assets

Improve speed of customer delivery
Improve speed of customer delivery
Why was it so challenging for the supply of toilet paper to keep up with sudden increases in demand during the pandemic?

Additional links in the supply chain increased the risk of a "bullwhip" effect

Manufacturers had very little idle capacity (low capacity cushions)

It is costly to change from commercial to consumer production

All of these
All of these
Supply chains are networks of independent entities, each acting on their own best interests. Getting everyone "synchronized" is a challenge. For example, a retailer increasing their order quantities in anticipation of a price increase can send signals upstream creating a "bullwhip" effect across the supply chain. What does this mean? (Pick the best answer)

Inventory levels are increased uniformly throughout the supply chain.

Firms are motivated to make independent decisions to pursue their own objectives.

Variability is magnified as we move downstream in a supply chain.

Variability is magnified as we move upstream in a supply chain.
Variability is magnified as we move upstream in a supply chain.
Supply chain management has evolved from being primarily concerned with purchasing decisions to a more strategic role in many firms. What evidence best supports this view?

The involvement of more complex processes and decisions that are of strategic importance to the firm.

Vendor-managed inventory practices

The use of EOQ inventory systems

The short-term / higher turnover nature of supply contracts.
The involvement of more complex processes and decisions that are of strategic importance to the firm.
Zara is an example of a company using supply chain management for strategic positioning in the market. Examples of this include which of the following? (Pick all that are correct)

Paying low wages to factory workers

Employing responsive supply chains for trendy products

Employing efficient supply chains for trendy products

A high degree of vertical integration
Employing responsive supply chains for trendy products

A high degree of vertical integration
Inventory turnover is a key metric often used to indicate supply chain efficiency. Which of the following are ways operations can positively impact this metric? (Pick all that are correct)

Forward placement of inventory in supply chains

Sourcing decisions that increase sales.

Forecasting and inventory management practices that reduce excess inventory.

Using make-to-stock strategies that increase working capital
Sourcing decisions that increase sales.

Forecasting and inventory management practices that reduce excess inventory.
Weeks of supply is another key metric also indicating the efficiency of a supply chain. When this number is increasing without an increase in average aggregate inventory, it likely indicates __________.

That profit margins are deteriorating.

that profit margins are increasing.

that sales may be increasing.

that sales may be lagging (slowing).
that sales may be lagging (slowing).
Manufacturing uses __________ measures of capacity whereas services use ________________ measures of capacity.
output, input
What creates diseconomies of scale?
-output may become greater than demand, meaning that the firm may need to implement discounts to get rid of excess output

-larger plant size may increase complexity of management, decreasing productivity

-too much competition within company, eating eachothers market share
Firms that are _____________(more/less) capital intensive, and thus having ___________ (higher/lower fixed costs) have more opportunity of economies of scale
more, higher
T or F: companies may merge to create economies of scale
True
List the three aspects of capacity flexibility
1. flexible plants
2. flexible processes
3. flexible workers
firms with high demand uncertainties, such as restaurants, typically have ___________(small/large) capacity cushions
large
firms with low demand uncertainties, such as ford, typically have ___________(small/large) capacity cushions
small
List the two strategies used to decide how much and when to change capacity
expansionist

wait and see
expansionist strategy utilizes ____________(small/large) increase in capacity (frequently/infrequently)
large, infrequently
wait and see strategy utilizes ____________(small/large) increase in capacity (frequently/infrequently)
small, frequently
Expansionist strategy is common in ___________ industries
capital intensive
Expansionist strategy is to market ____________ as wait and see strategy is to market ______________.
leader, follwoer
Tires are to _____________ demand as cars are to _____________ demand.
Dependent, independent
dependent demand is ___________(more/less) predictable than independent demand
more
A cycle service level of 95% means that
the firm wants to be certain that they can fulfill demand 95% of the time
Probability of stockout =
1 - cycle service level
In ABC classification, % of dollar usage measures
What percentage of the annual holding cost that an item accounts for
ABC Classification ranks items in order of
decreasing annual dollar usage
Why does no one win when forward buying occurs?
supplier: shipment buldges increase costs

customer: holding more inventory, higher costs
The Bullwhip Effect illustrates the increasing variability ________________ (upstream/downstream) in a supply chain.
upstream
Efficient supply chains are _________ intensive whereas responsive supply chains are _________ intensive.
Capital, labor
Why would a firm choose vertical over horizontal integration even though it costs more?
supply more of what customers want, when they want it without markdowns

-> higher gross profit margins
Projects start as a
statement of work
List the hierarchy of levels of a project
program

level 1: Project
level 2: Task
Level 3: Subtask
Level 4: Work package
A series of related jobs usually directed toward some major output and requiring a significant period of time to perform.
Project
Planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project.
Project management
A structure for organizing a project where a selfcontained team works full time on the project.
pure project
In this structure, team members are assigned from the functional units of the organization. The team members remain a part of their functional units and typically are not dedicated to the project.
Functional project
A structure that blends the functional and pure project structures. Each project uses people from different functional areas. A dedicated project manager decides what tasks need to be performed and when, but the functional managers control which people to use.
Matrix project
A specific event in a project.
project milestone
The hierarchy of project tasks, subtasks, and work packages.
Work breakdown structure (WBS)
Pieces of work within a project that consume time. The completion of all the activities of a project marks the end of the project.
Activities
The sequence(s) of activities in a project that form the longest chain in terms of their time to complete. This path contains zero slack time.
critical path
Activities that need to be completed immediately before another activity.
immediate predecessor
The time that an activity can be delayed without delaying the entire project; the difference between the late and early start times of an activity.
slack time
Extension of the critical path models that considers the trade-off between the time required to complete an activity and the cost. This is often referred to as "crashing" the project.
time-cost models
the level of capacity for which the process was designed.
best operating level
The volume of output at which average unit cost is minimized.
best operating level
Which of the following is not one of the difference between planning capacity for services versus manufacturing?
cost
"the ability to hold, receive, store, or accommodate."
capacity
Which of the following type of service organization should aim for low utilization because of the high level of uncertainty?
hospitals
Two common strategies used by organizations to add external capacity are
outsourcing capacity
sharing capacity
Many firms are tending to enter into longer-term relationships with vendors to supply their needs for perhaps the entire year. This changes the how many to order to how many to
hold
As it relates to inventory, a buyer's time expended to prepare the purchase order for more material is considered a(n) ____ cost.
ordering
Which order cost is frequently little more than a guess?
Multiple choice question.
shortage
Manual systems such as simple ________________________ logic depend on human posting of the transactions to replenish inventory.
two bin
The danger of stockout in the fixed-order quantity model occurs only during the
lead time
________________-cost is dependent on the level of integration and automation incorporated in the system.
transaction
if there were no costs or loss of time in changing from one product to another, what would the impact be? Check all that apply.
Multiple select question.
Reduced inventory levels

Costs would be lower

Many small lots would be produced
The amount of safety stock depends on the _____________________desired.
service level
Which of the following is NOT a reason to use inventory as a safeguard against raw material delivery time variation?
Multiple choice question.
As a supplement to vendor-managed inventory programs.
Which of the following is NOT a good reason to hold inventory?
As needed to improve company cash flow
If manufacturing equipment within a facility produces at different rates, one can use inventory to maintain______________________ of operations.
independence
Which of the following is not a common constraint regarding vendor managed inventory?
Multiple choice question.
shipping terms
What term refers to the management functions that support the complete cycle of material flow?
Logistics
Inventory turnover is a way to evaluate
supply chain efficiency.
Which of the following are resources controlled by project management? Check all that apply.
Material
Equipment
People
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