Supply Chain Management Chapter 9

Predictable variability is change in demand that cannot be forecasted.
False
Faced with predictable variability of demand, a company’s goal is to respond in a manner that maximizes profitability.
True
The advantage of carrying enough manufacturing capacity to meet demand in any period is very low inventory costs, because no inventory needs to be carried from period to period.
True
The disadvantage of carrying enough manufacturing capacity to meet demand in any period is that much of the expensive capacity would go unused during most months when demand was lower.
True
The advantage of building up inventory during the off season to keep production stable year round lies in the fact that a firm could get by with a smaller, more expensive factory.
False
The disadvantage of building up inventory during the off season to keep production stable year round is the expensive capacity that would go unused during most months when demand was lower.
False
An approach where a firm works with their retail partners in the supply chain to offer a price promotion during periods of low demand would shift some of the demand into a slow period, thereby spreading demand more evenly throughout the year and reducing the seasonal surge.
True
With supply and demand management decisions being made independently, it is easier to coordinate the supply chain, thereby increasing profit.
False
A firm can vary supply of product by controlling production capacity and inventory.
True
A firm that uses flexible work hours from the workforce to manage capacity to better meet demand is using a seasonal workforce.
False
Scheduling the workforce so that the available capacity better matches demand is using time flexibility from the workforce.
True
The use of a part-time workforce to increase the capacity flexibility by enabling the firm to have more people at work during peak periods is designing product flexibility into the production processes.
False
A firm that uses a temporary workforce during the peak season to increase capacity to match demand is using a seasonal workforce.
True
The use of dual facilities to manage capacity may be hard to sustain if the labor market is tight.
False
A firm that purchases peak production capability from other companies so that internal production remains level and can be done cheaply is using subcontracting.
True
A firm that builds dedicated facilities to produce a relatively stable output of products over time in a very efficient manner and purchases peak production capability from other companies is using subcontracting.
False
A firm that has production lines whose production rate can easily be varied to match demand has designed product flexibility into the production processes.
True
The use of a seasonal workforce requires that the workforce be multi-skilled and easily adapt to being moved from line to line.
True
Operations usually make the promotion and pricing decisions.
False
Maximizing revenue is typically the objective when marketing and sales make the promotion and pricing decisions.
True
Pricing decisions based only on revenue considerations often result in an increase in overall profitability.
False
When performing aggregate planning, the goal of all firms in the supply chain should be to maximize individual firm profits.
False
Determining how profits will be allocated to different members of the supply chain is a key to successful collaboration.
True
In general, as the fraction of increased demand coming from forward buying grows, offering the promotion during the peak demand period becomes more attractive.
False
Offering a promotion during a peak period that has significant forward buying creates even more variable demand than before the promotion.
True
Average inventory decreases if a promotion is run during the peak period and increases if the promotion is run during the off-peak period.
False
Promoting during a peak demand month may decrease overall profitability if a significant fraction of the demand increase results from a forward buy.
True
As forward buying becomes a smaller fraction of the demand increase from a promotion, it is less profitable to promote during the peak period.
False
As the product margin declines, promoting during the peak demand period becomes less profitable.
True
When faced with seasonal demand, a firm should use a combination of pricing (to manage demand) and production and inventory (to manage supply) to improve profitability.
True
Predictable variability is
A) change in demand that can be forecasted.
B) change in demand that cannot be forecasted.
C) change in demand that has been planned.
D) change in demand that has been scheduled.
E) all of the above
A) change in demand that can be forecasted.
Which of the following is not a problem caused by products experiencing predictable variability of demand?
A) High levels of stockouts during peak demand
B) High levels of excess inventory during periods of low demand
C) Increased responsiveness of the supply chain
D) Increased costs in the supply chain
E) Decreased responsiveness of the supply chain
C) Increased responsiveness of the supply chain
A firm can handle predictable variability by managing
A) supply using capacity, inventory, trade promotions, and backlogs.
B) supply using capacity, inventory, subcontracting, and backlogs.
C) demand using short-term price discounts and trade promotions.
D) A and C only
E) B and C only
E) B and C only
Seasonal demand can be met by
A) maintaining enough manufacturing capacity to meet demand in any period.
B) building up inventory during the off season to meet demand during peak seasons.
C) offering a price promotion during periods of low demand to shift some of the demand into a slow period.
D) all of the above
E) A and B only
D) all of the above
The advantage of maintaining enough manufacturing capacity to meet demand in any period is
A) very low inventory costs because inventory needs to be carried from period to period.
B) very low inventory costs because no inventory needs to be carried from period to period.
C) very high inventory costs because no inventory needs to be carried from period to period.
D) very high inventory costs because expensive capacity would go unused during most months when demand was lower.
E) none of the above
B) very low inventory costs because no inventory needs to be carried from period to period.
The disadvantage of maintaining enough manufacturing capacity to meet demand in any period is
A) much of the expensive capacity would go unused during most months when demand was lower.
B) the expensive capacity would be used consistently throughout the year.
C) most of the expensive capacity would still be used during most months when demand was lower.
D) very low inventory costs because no inventory needs to be carried from period to period.
E) None of the above are true.
A) much of the expensive capacity would go unused during most months when demand was lower.
The advantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is
A) very low inventory costs because no inventory needs to be carried from period to period.
B) much of the expensive capacity would go unused during most months when demand was lower.
C) in the fact that a firm could get by with a smaller, less expensive factory.
D) in the fact that a firm could get by with a larger, more expensive factory.
E) None of the above are true.
C) in the fact that a firm could get by with a smaller, less expensive factory.
The disadvantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is
A) very low inventory costs because no inventory needs to be carried from period to period.
B) very high inventory costs because inventory needs to be carried from period to period.
C) in the fact that a firm could get by with a smaller, less expensive factory.
D) in the fact that a firm could get by with a larger, more expensive factory.
E) None of the above are true.
B) very high inventory costs because inventory needs to be carried from period to period.
The advantage of offering a price promotion during periods of low demand to shift some of the demand into a slow period is
A) a demand pattern that is less expensive to supply.
B) very high inventory costs because inventory needs to be carried from period to period.
C) in the fact that a firm could get by with a smaller, more expensive factory.
D) much of the expensive capacity would go unused during most months when demand was lower.
E) all of the above
A) a demand pattern that is less expensive to supply.
Companies typically divide the task of supply and demand so that
A) Marketing manages demand and Operations manages supply.
B) Marketing manages supply and Operations manages demand.
C) Marketing manages demand and supply.
D) Operations manages demand and supply.
E) none of the above
A) Marketing manages demand and Operations manages supply.
With supply and demand management decisions being made independently,
A) it is increasingly difficult to coordinate the supply chain, thereby increasing profit.
B) it is increasingly difficult to coordinate the supply chain, thereby decreasing profit.
C) it is easier to coordinate the supply chain, thereby decreasing profit.
D) it is easier to coordinate the supply chain, thereby increasing profit.
E) none of the above
B) it is increasingly difficult to coordinate the supply chain, thereby decreasing profit.
A firm can vary supply of product by controlling
A) production capacity and inventory.
B) production capacity and price promotions.
C) price promotions and inventory.
D) production capacity and inventory promotions.
E) none of the above
A) production capacity and inventory.
Which of the following is not an approach that firms can use when managing capacity to meet predictable demand variability?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Using common components across multiple products
E) Using common components across multiple products
The capacity management approach that uses flexible work hours from the workforce to manage capacity to better meet demand is
A) time flexibility from workforce.
B) use of seasonal workforce.
C) use of subcontracting.
D) use of dual facilities-dedicated and flexible.
E) designing product flexibility into the production processes.
A) time flexibility from workforce.
The capacity management approach that uses a temporary workforce during the peak season to increase capacity to match demand is
A) time flexibility from workforce.
B) the use of seasonal workforce.
C) the use of subcontracting.
D) the use of dual facilities-dedicated and flexible.
E) designing product flexibility into the production processes.
B) the use of seasonal workforce.
The capacity management approach where a firm purchases peak production from another firm so that internal production remains level and can be done cheaply is
A) time flexibility from workforce.
B) the use of seasonal workforce.
C) the use of subcontracting.
D) the use of dual facilities-dedicated and flexible.
E) designing product flexibility into the production processes.
C) the use of subcontracting.
The capacity management approach where a firm builds facilities to produce a relatively stable output of products over time in a very efficient manner and facilities to produce a widely varying volume and variety of products, but at a higher unit cost is
A) time flexibility from workforce.
B) the use of seasonal workforce.
C) the use of subcontracting.
D) the use of dual facilities-dedicated and flexible.
E) designing product flexibility into the production processes.
D) the use of dual facilities-dedicated and flexible.
The capacity management approach where a firm has production lines whose production rate can easily be varied to match demand is
A) time flexibility from workforce.
B) the use of seasonal workforce.
C) the use of subcontracting.
D) the use of dual facilities-dedicated and flexible.
E) designing product flexibility into the production processes.
E) designing product flexibility into the production processes.
Which approach to capacity management may be hard to sustain if the labor market is tight?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Designing product flexibility into the production processes
B) Use of seasonal workforce
Which approach to capacity management makes use of spare plant capacity that exists in the form of hours when the plant is not operational?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Designing product flexibility into the production processes
A) Time flexibility from workforce
Which approach to capacity management makes use of overtime, which is varied to match the variation in demand?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Designing product flexibility into the production processes
A) Time flexibility from workforce
Which approach to capacity management would schedule the workforce so that the available capacity better matches demand?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Designing product flexibility into the production processes
A) Time flexibility from workforce
Which approach to capacity management would use a part-time workforce to increase capacity flexibility by enabling the firm to have more people at work during peak periods?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Designing product flexibility into the production processes
A) Time flexibility from workforce
The key to which capacity management approach would involve having both volume (fluctuating demand from a manufacturer) and variety flexibility (demand from several manufacturers) to be sustainable?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Designing product flexibility into the production processes
C) Use of subcontracting
Which approach to capacity management would require that the workforce be multi-skilled and easily adapt to being moved from line to line?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Designing product flexibility into the production processes
E) Designing product flexibility into the production processes
Which approach to capacity management would use production machinery that can be changed easily from producing one product to another?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Designing product flexibility into the production processes
E) Designing product flexibility into the production processes
Which approach to capacity management would only be effective if the overall demand across all the products is relatively constant?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Designing product flexibility into the production processes
E) Designing product flexibility into the production processes
Which of the following is an approach that firms can use when managing inventory to meet predictable demand variability?
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-dedicated and flexible
E) Using common components across multiple products
E) Using common components across multiple products
When most of the products a firm produces have the same peak demand season, in order to meet predictable variability with inventory, it must
A) use common components across multiple products.
B) use a seasonal workforce.
C) build inventory of high demand or predictable demand products.
D) use subcontracting.
E) use dual facilities-dedicated and flexible.
C) build inventory of high demand or predictable demand products.
Supply chains can influence demand by using
A) production capacity and inventory.
B) pricing and other promotions.
C) price promotions and inventory.
D) production capacity and inventory promotions.
E) production capacity and other promotions.
B) pricing and other promotions.
The pricing and promotion decisions are often made by
A) marketing and sales.
B) marketing and operations.
C) operations and sales.
D) marketing, operations, and sales.
E) marketing and operations without sales.
A) marketing and sales.
The promotion and pricing decisions made by marketing and sales typically have the objective of
A) maximizing profitability.
B) minimizing profitability.
C) minimizing revenue.
D) maximizing revenue.
E) maximizing profitability across the supply chain.
D) maximizing revenue.
Pricing decisions based only on revenue considerations often result in
A) a decrease in overall profitability.
B) an increase in overall profitability.
C) a decrease in overall revenue.
D) a decrease in supply chain revenue.
E) an increase in supply chain profitability.
A) a decrease in overall profitability.
When planning, the goal of all firms in the supply chain should be to maximize supply chain profits because
A) this leaves them less profit to divide among themselves.
B) this leaves them more profit to divide among themselves.
C) this outcome leaves them more profit to pay tax on.
D) this outcome will increase their charitable giving.
E) none of the above
B) this leaves them more profit to divide among themselves.
One key to successful collaboration when the supply chain is performing aggregate planning is
A) determining how losses will be allocated to different members of the supply chain.
B) determining how profits will be allocated to different members of the supply chain.
C) determining how labor will be allocated to different members of the supply chain.
D) determining how customers will be allocated to different members of the supply chain.
E) none of the above
B) determining how profits will be allocated to different members of the supply chain.
An increase in consumption of the product either from new or existing customers is
A) market growth.
B) stealing share.
C) forward selling.
D) forward buying.
E) none of the above
A) market growth.
Customers substituting the firm’s product for a competitor’s product is
A) market growth.
B) stealing share.
C) forward selling.
D) forward buying.
E) none of the above
B) stealing share.
Customers moving up future purchases to the present is
A) market growth.
B) stealing share.
C) forward selling.
D) forward buying.
E) none of the above
D) forward buying.
In general, as the fraction of increased demand coming from forward buying grows, offering the promotion during the peak demand period becomes
A) less attractive.
B) more attractive.
C) more profitable.
D) less significant.
E) none of the above
A) less attractive.
Offering a promotion during a peak period that has significant forward buying
A) creates a desirable demand pattern.
B) creates a demand pattern less costly to serve.
C) creates a demand pattern even more costly to serve.
D) shifts demand from the peak period to the slow period.
E) shifts demand to a more desirable period.
C) creates a demand pattern even more costly to serve.
Average inventory
A) increases if a promotion is run during the peak period.
B) increases if a promotion is run during the off-peak period.
C) decreases if a promotion is run during the peak period.
D) decreases if a promotion is run during the off-peak period.
E) both A and D
B) increases if a promotion is run during the off-peak period.
Promoting during a peak demand month may decrease overall profitability if
A) a small fraction of the demand increase results from a forward buy.
B) any of the demand increase results from a forward buy.
C) a significant fraction of the demand increase results from a forward buy.
D) none of the above
E) all of the above
C) a significant fraction of the demand increase results from a forward buy.
As the product margin declines, promoting during the peak demand period becomes
A) less profitable.
B) more profitable.
C) less of a risk.
D) more desirable.
E) none of the above
A) less profitable.
________ variability is change in demand that can be forecasted.
A) Capacity
B) Predictable
C) Inventory
D) Backlog
B) Predictable
A firm can vary supply of product by controlling
A) inventory.
B) pricing.
C) demand.
D) revenue
A) inventory.
A firm can vary supply of product by controlling
A) revenue.
B) pricing.
C) demand.
D) capacity
D) capacity
In this approach to managing capacity, a firm uses flexible work hours by the workforce to manage capacity to better meet demand.
A) Time flexibility from workforce
B) Use of seasonal workforce
C) Use of subcontracting
D) Use of dual facilities-specialized and flexible
A) Time flexibility from workforce
In this approach to managing capacity, a firm uses a temporary workforce during the peak season to increase capacity to match demand.
A) Time flexibility from workforce
B) Use of subcontracting
C) Use of dual facilities-specialized and flexible
D) Use of seasonal workforce
D) Use of seasonal workforce
In this approach to managing capacity, a firm subcontracts peak production so that internal production remains level and can be done cheaply.
A) Time flexibility from workforce
B) Use of subcontracting
C) Use of dual facilities-specialized and flexible
D) Use of seasonal workforce
B) Use of subcontracting
In this approach to managing capacity, a firm has flexible production lines whose production rate can easily be varied.
A) Time flexibility from workforce
B) Use of subcontracting
C) Designing product flexibility into the production processes
D) Use of seasonal workforce
C) Designing product flexibility into the production processes
Which of the following is not a key factor influencing the timing of a product promotion?
A) Cost of holding inventory
B) Customer perceptions
C) Cost of changing the level of capacity
D) Product margins
B) Customer perceptions
When a promotion is offered during a period, that period’s demand tends to go up. This increase in demand results from a combination of three factors. Which of the following is not one of these three factors?
A) Forward buying
B) Stealing share
C) Backward buying
D) Market growth
C) Backward buying
Which factor favors promotion during low-demand periods?
A) High forward buying
B) High ability to steal market share
C) High ability to increase overall market
D) High margin
A) High forward buying
Which factor favors promotion during low-demand periods?
A) High margin
B) High ability to steal market share
C) High ability to increase overall market
D) Low margin
D) Low margin
Which factor favors promotion during peak-demand periods?
A) High margin
B) Low ability to steal market share
C) High ability to increase overall market
D) Low margin
C) High ability to increase overall market