MKT 364 exam 3 review

Office layout

� Grouping of workers, their equipment, and spaces to provide comfort, safety, and movement of information
� Movement of information is main distinction
� Typically in state of flux due to frequent technological changes

Retail Layout

� Objective: maximize profitability per square foot of floor space
� Sales and profitability vary directly with customer exposure

Warehouse Layout

� Objective is to find the optimum trade-offs between handling costs and costs associated with warehouse space
� Maximize the total "cube" of the warehouse - utilize its full volume while maintaining low material handling costs
� Warehouse density tends t

Fixed-position layout

� Product remains in one place
� Workers and equipment come to site

Pass-oriented Layout

� Like machines and equipment are grouped together
� Flexible & capable of handling wide variety of products / services
� Scheduling can be difficult
� Setup, material handling, and labor costs can be high

Work Cell Layout

� Reorganizes people and machines into groups to focus on single products or product groups
� Group technology identifies products that have similar characteristics for particular cells
� Volume must justify cells

Product-oriented Layout

� Organized around products or families of similar high-volume, low-variety products
� Volume is adequate for high equipment utilization
� Product demand is stable enough to justify high investment in specialized equipment
� Product is standardized or app

What is assembly line balancing? Calculate cycle time, minimum number of workstations, idle time, and efficiency.

o Objective is to minimize the imbalance between machines or personnel while meeting required output
o Starts with the precedence relationships
o Determine cycle time
o Calculate theoretical minimum number of workstations
o Balance the line by assigning s

Functions of Inventory

� To decouple or separate various parts of the production process
� To decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers
� To take advantage of quantity discounts
� To hedge against infl

Types of Inventory

raw materials, work in process, maintenance/repair/operating, and finished goods

Raw Materials

Purchased but not processed


� Undergone some change but not completed
� A function of cycle time for a product

Maintenance/repair/operating (MRO)

Necessary to keep machinery and processes productive

Finished goods

completed product awaiting shipment

ABC analysis

Divides inventory into three classes based on annual dollar volume
� Class A - high annual dollar volume
� Class B - medium annual dollar volume
� Class C - low annual dollar volume

Cycle Counting

� Items are counted and records updated on a periodic basis
� Often used with ABC analysis to determine cycle

Two main questions of inventory management

How much to order and when to order

Reorder Point

when you need to reorder

Safety Stock

what you have on layaway just in case

Sales and Operating Plan

� Coordination of demand forecasts with functional areas and the supply chain
� Typically done by cross-functional teams
� Determine which plans are feasible
� Limitations must be reflected
� Provides warning when resources do not match expectations

S&OP is aimed at

1. The coordination and integration of the internal and external resources necessary for a successful aggregate plan
2. Communication of the plan to those charged with its execution

S&OP results in:

an aggregate plan

S&OP requirements

� A logical unit for measuring sales and output
� A forecast of demand for a reasonable intermediate planning period in aggregate terms
� A method to determine the relevant costs
� A model that combines forecasts and costs so scheduling decisions can be m

Aggregate Planning

� Part of a larger production planning system
� Disaggregation breaks the plan down into greater detail
� Disaggregation results in a master production schedule

The objective of aggregate planning is:

usually to meet forecast demand while minimizing cost over the planning period

revenue management

o Allocating resources to customers at prices that will maximize revenue
� Service or product can be sold in advance of consumption
� Demand fluctuates
� Relatively fixed resource (capacity)
� Segmentable demand
� Low variable costs high fixed costs

Capacity options

� Changing inventory levels
� Varying workforce size by hiring or layoffs
� Varying production rates through overtime or idle time
� Subcontracting
� Using part-time workers

Changing inventory levels

� Increase inventory in low demand periods to meet high demand in the future
� Increases costs associated with storage, insurance, handling, obsolescence, pilferage, and capital investment
� Shortages may mean lost sales due to long lead times and poor cu

Varying workforce size by hiring or layoffs

� Match production rate to demand
� Training and separation costs for hiring and laying off workers
� New workers may have lower productivity
� Laying off workers may lower morale and productivity

Varying production rates through overtime or idle time

� Allows constant workforce
� May be difficult to meet large increases in demand
� Overtime can be costly and may drive down productivity
� Absorbing idle time may be difficult


� Temporary measure during periods of peak demand
� May be costly
� Assuring quality and timely delivery may be difficult
� Exposes your customers to a possible competitor

Using part-time workers

� Useful for filling unskilled or low skilled positions, especially in services

Demand Options

� Influencing Demand
� Back ordering during high-demand periods
� Counterseasonal product and service mixing

Influencing Demand

� Attempt to shift demand to slow periods

Back ordering during high-demand periods

� Requires customers to wait for an order without loss of goodwill or the order
� Most effective when there are few if any substitutes for the product or service

Counterseasonal product and service mixing

� Develop a product mix of counterseasonal items
� May lead to products or services outside the company's areas of expertise

Chase Strategy

� Match output rates to demand forecast for each period
� Vary workforce levels or vary production rate
� Favored by many service organizations

Level Strategy

� Daily production is uniform
� Use inventory or idle time as buffer
� Stable production leads to better quality and productivity

Dependent Demand

� The demand for one item is related to the demand for another item

Independent Demand

� The demand for one item is not related to the demand for another item


� Breaking products and the making of them into smaller pieces

MRP benefits

� Better response to customer orders
� Faster response to market changes
� Improved utilization of facilities and labor
� Reduced inventory levels

Which of the following is a function of inventory?

a. to decouple various parts of the production process
b. to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand
c. to take advantage of quantity discounts
d. to hedge against inflation

Which of the following statements about ABC analysis is FALSE?

ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings.

Which of the following is NOT an assumption of the economic order quantity model shown below?
Q* = (Square root)2DS/H

Production and use can occur simultaneously.

Which of the following statements regarding the reorder point is TRUE?

a. The reorder point is that quantity that triggers an action to restock an item.
b. There is a reorder point even if lead time and demand during lead time are constant.
c. The reorder point is larger than d � L if safety stock is present.
d. A shorter le

The objective of aggregate planning is to meet forecast demand while ________ over the planning period.

minimizing cost

Which of these is among the demand options of aggregate planning?

back-ordering during high-demand periods

Which of the following is consistent with a chase strategy?

a. Vary production levels to meet demand requirements
b. Vary work force to meet demand requirements
c. Vary production levels and work force to meet demand requirements
d. Little or no use of inventory to meet demand requirements

Which of the following is NOT a key benefit of MRP?

increased quality

A grill assembly takes 20 washers. Instead of listing these washers separately, they are grouped into a single kit for production. How is the bill of material for the washers classified?

planning bill

Which lot-sizing technique orders the quantity needed during a predetermined time between orders?

periodic order quantity

Which of the following is not a goal of JIT partnerships?

inspect all incoming shipments to ensure zero defects

Which of the statements below best describes office layout?

positions workers, their equipment, and spaces/offices to provide for movement of information

A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its intermediate period), it estimates the sum of demands to be 105,000 units. The firm has 250 production days per year. In January, which has 22 production

level production of 420 units per day is below the January requirement.