Operations Management Exam 2

Department A is responsible for making the chains and letters in advance, without specific customer orders. This indicates a make-to-stock strategy, where products are produced based on anticipated demand. Department B, on the other hand, assembles the necklaces only when orders are received. This suggests a make-to-order approach, where products are manufactured based on specific customer requests.

The daily report to the CEO of Walt Disney Parks & Resorts regarding the six Orlando parks includes yesterday's forecasted attendance and yesterday's actual attendance. This information is important for the CEO to understand how well the parks are performing in terms of attendance and to evaluate the accuracy of the attendance forecasts. By comparing the forecasted attendance with the actual attendance, the CEO can assess the effectiveness of their forecasting methods and make informed decisions regarding park operations and future planning.

Mass customization refers to the process of producing customized products on a large scale. When done correctly, it increases pressure on supply chain performance because it requires efficient coordination and synchronization of various activities to meet individual customer demands. It also helps eliminate the guesswork that comes with sales forecasting as the products are tailored to specific customer needs. Additionally, mass customization drives down inventories as products are produced based on actual customer orders, reducing the need for excessive stock. Lastly, it increases pressure on scheduling as the production process needs to be flexible and responsive to accommodate customization requests.

The forecast for the next period using simple exponential smoothing can be calculated by adding the weighted average of the previous forecast and the actual demand. In this case, the previous forecast was 58 and the actual demand was 61. The smoothing factor, also known as the weight, is given as 0.3. Therefore, the forecast for the next period can be calculated as follows: Next forecast = (Previous forecast * Weight) + (Actual demand * (1 - Weight)) Next forecast = (58 * 0.3) + (61 * (1 - 0.3)) Next forecast = 17.4 + 42.7 Next forecast = 60.1 Therefore, the forecast for the next period would be 60.1, which is closest to the given answer of 58.9.

Time series data refers to a sequence of observations taken at regular intervals over time. These observations can show different patterns or behaviors. Trend refers to a long-term increase or decrease in the data. Random variations are unpredictable fluctuations that occur in the data. Seasonality refers to regular patterns that repeat at fixed intervals, such as daily, weekly, or yearly. Cycles refer to longer-term patterns that repeat over a longer period of time, such as economic cycles. Therefore, time series data can exhibit all of these behaviors simultaneously.

The mean absolute deviation (MAD) is calculated by finding the absolute value of the difference between each actual value and its corresponding forecast value, summing these absolute differences, and then dividing by the number of values. In this case, the absolute differences between the actual values and the forecast values are 3, 1, 4, and 7. The sum of these absolute differences is 15. Dividing this sum by the number of values (4) gives a MAD of 3.75. Therefore, the correct answer is not available.

A large office which has a typing pool, a copying department, and all the managers in a large suite of offices can be considered an example of a batch process. In a batch process, similar tasks or activities are grouped together and completed in batches or sets. In this scenario, the typing pool and copying department may handle multiple tasks together, such as typing and copying documents in batches, while the managers may handle their tasks in a separate batch. This approach allows for efficiency and streamlining of work by grouping similar activities together.

The primary purpose of the mean absolute deviation (MAD) in forecasting is to measure forecast accuracy. MAD calculates the average absolute difference between the forecasted values and the actual values. It provides a quantitative measure of how well the forecasted values match the actual values. By measuring forecast accuracy, organizations can assess the reliability of their forecasting methods and make necessary adjustments to improve future predictions.

The Delphi technique is closely related to opinion/judgmental forecasting because it involves gathering opinions and judgments from a panel of experts or stakeholders. In this method, the experts provide their individual forecasts, which are then compiled and analyzed to reach a consensus or a more accurate prediction. This technique is particularly useful when there is a lack of historical data or when the future is uncertain and subjective opinions are valuable.

A smaller value of alpha would cause exponential smoothing to respond more slowly to forecast errors. In exponential smoothing, alpha represents the weight given to the most recent observation in the smoothing process. A smaller alpha value means less weight is given to the most recent observation, resulting in a slower response to changes in the data. Therefore, an alpha value of 0.10 would cause exponential smoothing to respond the most slowly to forecast errors.

The bill of material is the input to material requirements planning which lists the assemblies, subassemblies, parts, and raw materials needed to produce one unit of finished product. It provides a comprehensive breakdown of all the components required for the production process, allowing for accurate planning and scheduling of materials.

A product-focused process is commonly used to produce high-volume, low-variety products. This means that the process is designed to efficiently produce a large quantity of the same product, while minimizing the variety of products being produced. This type of process is often used in industries such as automotive manufacturing, where a large number of identical products are produced in a standardized manner. By focusing on high volume and low variety, the process can optimize efficiency and reduce costs.

This statement suggests that operations managers can prioritize environmental concerns while still striving to minimize costs. It implies that being environmentally sensitive does not necessarily mean sacrificing a low cost strategy. This aligns with the idea that organizations can adopt sustainable practices and still be financially efficient.

Forecasts are rarely perfect because they are based on assumptions and predictions about future events, which are inherently uncertain. No matter how much data and analysis is used, there will always be some degree of error or deviation from the actual outcome. Therefore, it is important to understand that forecasts are not guaranteed to be completely accurate and should be interpreted with caution.

The correct answer is economic, technological, and demand. Business organizations use these types of forecasts to make informed decisions about their operations. Economic forecasts help them understand the overall economic conditions and trends that may impact their business. Technological forecasts help them anticipate advancements in technology that may affect their industry. Demand forecasts help them predict customer demand for their products or services. By considering all three types of forecasts, organizations can develop strategies and plans to adapt and thrive in a changing business environment.

The statement "Fourteen is the reorder point, and 100 is the order quantity" is true because the inventory decision rule states that when the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered. The reorder point is the inventory level at which a new order should be placed, and in this case, it is 14. The order quantity is the number of items that should be ordered, and in this case, it is 100.

Associative models use variables such as price and promotional expenditures, which are related to product demand, to predict demand. These models analyze the relationship between these variables and demand patterns to make accurate predictions. Unlike other techniques such as exponential smoothing and weighted moving average, associative models specifically focus on the relationship between demand and other relevant factors, making them suitable for predicting demand based on these variables. Therefore, the correct answer is associative models.

The four-month moving average is calculated by taking the average of the sales data for the previous four months. In this case, the average of the sales data for Feb, Mar, Apr, and May would be 42+48+46+44 = 180, and dividing it by 4 would give us 45. Therefore, the approximate forecast for May using a four-month moving average would be 45.

Adding safety stock is a strategy to control stockout risks when demand is not uniform and constant. Safety stock is extra inventory that is held to protect against unexpected fluctuations in demand or lead time. By adding safety stock, a company can ensure that they have enough inventory on hand to meet customer demand even during periods of high demand or longer lead times. This helps to reduce the risk of stockouts and maintain customer satisfaction.

The given time series equation is Yt = 40,000 + 150t, where t represents the time period. In this equation, Yt represents the estimated demand at time period t.

Given that t = 1 in April, we can substitute this value into the equation to find the estimated demand for April.

Y1 = 40,000 + 150(1) = 40,000 + 150 = 40,150

Therefore, the estimated demand for June would be the value of Yt when t = 3 (since June is two time periods after April).

Y3 = 40,000 + 150(3) = 40,000 + 450 = 40,450

Since none of the answer choices match the calculated value of 40,450, the correct answer is None of the above.

The weighted moving average method assigns different weights to previous demand data based on their recency. In this case, the weight assigned to the previous month's demand is 5, the weight for demand two months ago is 3, and the weight for demand three months ago is 1. To calculate the forecast for August, we multiply the demand in May by 5, the demand in June by 3, and the demand in July by 1. Then, we sum these values and divide by the sum of the weights (5 + 3 + 1 = 9). Using this formula, the forecast for August is (1000 * 5 + 2200 * 3 + 3000 * 1) / 9 = 2511. Therefore, the correct answer is 2511.

In a simple linear regression model, the predictor variable is represented by the variable X. In this equation, Y is the dependent variable, which means it is the variable being predicted or explained by the predictor variable X. The value of Y is determined by the values of X, α (the intercept), and β (the coefficient of X). Therefore, X is the predictor variable in this equation.

When the demand for a product increases by 50%, the EOQ (Economic Order Quantity) does not increase by the same percentage. The EOQ is calculated based on factors such as holding costs, ordering costs, and demand rate. Since the demand rate is only one of the factors, a 50% increase in demand will result in a less than 50% increase in the EOQ. Therefore, the correct answer is "increased by less than 50%".

The EOQ model is used to determine the optimal order quantity that minimizes both carrying and setup costs. In this case, the cost-minimizing order quantity is 200 units and the total annual inventory cost is $600. To find the carrying cost per unit per year, we divide the total annual inventory cost by the order quantity. Therefore, the carrying cost per unit per year for this item is $600/200 = $3.00.

Time series forecasting is a method that involves analyzing past demand patterns to predict future demand. By examining historical data and identifying trends, cycles, and seasonal patterns, it becomes possible to make accurate forecasts about future demand. This approach does not rely on qualitative data or assume that future demand will be the same as past demand. Additionally, while time series forecasting is powerful in capturing trends and patterns, it is not necessarily more powerful than causal forecasting, which considers the relationship between variables. Therefore, the correct statement in this case is that the analysis of past demand helps predict future demand.

A six-month moving average forecast is better than a three-month moving average forecast if demand is rather stable because a longer time period allows for a smoother average that is less influenced by short-term fluctuations. This provides a more accurate representation of the overall trend and helps to reduce the impact of random variations in the data.

The exponential smoothing forecast is calculated by taking a weighted average of the actual demand and the previous forecast value. The weight given to the actual demand is determined by the alpha value. In this case, with an alpha of .4, the weight given to the actual demand is 40%, while the weight given to the previous forecast value is 60%. Therefore, the forecast for the next period is calculated as follows: (0.4 * 103) + (0.6 * 99) = 41.2 + 59.4 = 100.6.

The fixed-period inventory model requires more safety stock than the fixed-quantity models because a stockout can occur during the review period as well as during the lead time. In the fixed-period model, inventory is only reviewed and replenished at specific intervals, such as weekly or monthly. This means that if a stockout occurs during the review period, there is no immediate replenishment, leading to potential stockouts and lost sales. Therefore, more safety stock is needed to account for this possibility and ensure sufficient inventory levels during both the review period and the lead time.

Cycle counting allows for more rapid identification of errors and consequent remedial action compared to annual physical inventory. This is because cycle counting involves counting a small portion of inventory on a regular basis throughout the year, allowing errors to be identified and corrected more quickly. In contrast, annual physical inventory involves counting the entire inventory once a year, which can be time-consuming and delays the identification and remediation of errors.

The economic order quantity (EOQ) is a formula used to determine the optimal order quantity that minimizes the total cost of inventory. It is calculated by taking the square root of (2 times the annual demand multiplied by the order cost divided by the holding cost). In this case, the annual demand is 10,000 units, the order cost is $150, and the holding cost is 25% of the cost of the computer, which is $250. Plugging these values into the formula, we get the approximate EOQ of 110 units.

The statement that is false is "The company was founded as, and still is, a 'virtual retailer' with no inventory." This statement is false because Amazon started as an online bookstore but has since expanded its inventory to include a wide range of products. Amazon now sells physical goods and has a vast network of warehouses to store and ship these products. Therefore, the company does have inventory.

A scatter diagram is used to obtain the best linear trend (or linear regression) line in a linear regression / correlation analysis. A scatter diagram is a graph that displays the relationship between two variables, with one variable plotted on the x-axis and the other variable plotted on the y-axis. By visually examining the scatter diagram, it is possible to identify the general pattern or trend in the data. The best linear trend line can then be drawn to represent this trend.

A master production schedule specifies what product is to be made and when. This means that it outlines the specific products that need to be manufactured and the time frame in which they should be produced. It does not include information about raw materials, components, labor hours, or financial resources required for production.

The given document outlines the production requirements for different types of products over a period of four weeks. It specifies the quantity of each product that needs to be produced in each week. This type of document is known as a master production schedule, which serves as a detailed plan for production activities and helps in coordinating the production process. It provides the necessary information for scheduling and coordinating resources, materials, and labor to meet the production requirements.

The cumulative lead time for X is 8 weeks. This is because it takes 1 week to assemble X, 1 week to manufacture Y (which is required for X), and 6 weeks to procure Z (which is required for Y). Therefore, the total time it takes to complete X is 1 + 1 + 6 = 8 weeks.

Moving average is not a type of qualitative forecasting because it is a quantitative forecasting method. Qualitative forecasting methods rely on subjective opinions, judgments, and experiences to make predictions, whereas quantitative methods use historical data and mathematical models. Executive opinions, sales force composites, consumer surveys, and the Delphi method are all examples of qualitative forecasting techniques that involve gathering opinions and input from individuals or groups. On the other hand, moving average is a quantitative method that calculates the average of a set of data points over a specific time period to identify trends and patterns.

The estimated regression line is given as Y = 20 + 2.1X, where Y represents sales and X represents advertising. To find the estimate for sales when advertising is $10,000, we substitute X = 10,000 into the regression line equation. Therefore, Y = 20 + 2.1(10,000) = 20 + 21,000 = $21,020.

Based on the information given, the entrepreneur should choose a line process in the city. This is because the capital is readily available in the city, which is crucial for setting up a factory. Additionally, the city offers a larger market, which means there is a higher potential for sales and profits. Although the small town may have unskilled labor available, the availability of different types of labor in the city can provide more flexibility and options for the entrepreneur.

Dell builds its computers overseas in order to gain a low-cost advantage. This statement is false because Dell actually assembles its computers in the U.S., not overseas. Dell utilizes a global supply chain, but the assembly of its computers takes place in the U.S. This allows Dell to have better control over the manufacturing process and ensures high-quality standards. By keeping the assembly in the U.S., Dell can also respond quickly to customer demands and customization requests.

The typical inventory model aims to answer two fundamental questions: when to place an order (timing) and how much to order (quantity). By determining the optimal timing and quantity of orders, a business can effectively manage its inventory levels and balance the costs associated with ordering and carrying inventory. Therefore, the correct answer is timing and quantity of orders.

The cumulative lead time for R can be calculated by adding up the lead times for each component. R requires 4 of component S, which has a lead time of 2 weeks. Therefore, it will take 4 x 2 = 8 weeks to procure all the required S components. Component S requires 3 of part T, which has a lead time of 6 weeks. Therefore, it will take 3 x 6 = 18 weeks to procure all the required T parts. Adding up the lead times for S and T, we get 8 + 18 = 26 weeks. Since R itself has a lead time of 1 week, the cumulative lead time for R is 26 + 1 = 27 weeks. Therefore, the correct answer is 27.

Inventory serves multiple functions in a business. It helps to decouple or separate different parts of the production process, ensuring that one stage can continue even if another is delayed. Additionally, inventory allows firms to decouple from fluctuations in demand by providing a stock of goods that can meet customer needs even during peak periods. It also enables businesses to take advantage of quantity discounts by purchasing larger quantities at lower prices. Lastly, inventory can act as a hedge against inflation, as goods purchased at lower prices can be sold at higher prices in the future. Therefore, all of the given options are valid functions of inventory.

Enterprise resource planning (ERP) systems offer numerous advantages, including creating commonality of databases, increasing communications and collaboration worldwide, and helping integrate multiple sites and business units. Additionally, ERP systems can provide a strategic advantage over competitors by streamlining operations and improving efficiency. However, one disadvantage of implementing an ERP system is that it requires major changes in the company and its processes, which can be disruptive and time-consuming.

When the ordering cost decreases from $90 per order to $10, the EOQ (Economic Order Quantity) will increase. The EOQ is inversely proportional to the square root of the ordering cost. Therefore, when the ordering cost decreases by a factor of 9 (from $90 to $10), the EOQ will increase by a factor of the square root of 9, which is 3. Therefore, the revised EOQ will be one-third as large as the original EOQ.

When the number of periods in a moving average is increased, it will result in greater smoothing of the data. However, this increased smoothing comes at the expense of responsiveness to changes. In other words, as more periods are included in the average, the moving average becomes slower to react to any recent changes or fluctuations in the data. Therefore, the responsiveness to changes is diminished when the number of periods increases.

Department B would be primarily concerned with delivery time because they are responsible for assembling the necklaces when orders are received. Their main focus would be on ensuring that the completed necklaces are delivered to the customers within the specified time frame. This involves coordinating with Department A to ensure timely production of the chains and letters, managing the assembly process efficiently, and coordinating with the shipping department to ensure prompt delivery.

Holding inventory generally incurs costs such as storage, insurance, and obsolescence. Therefore, minimizing holding costs would not be a motive for a firm to hold inventories. Instead, firms typically hold inventories for reasons such as decoupling parts of the production process, providing a selection for customers, and taking advantage of quantity discounts.

If the cost of placing an order doubles in the basic EOQ model, the EOQ (Economic Order Quantity) will increase by 100%. This is because the EOQ is inversely proportional to the square root of the ordering cost. When the ordering cost doubles, the square root of the ordering cost also doubles, resulting in a doubling of the EOQ.

When using a weighted moving average to forecast demand, giving an equal weight to all data means that each data point has the same importance in the calculation of the average. This approach assumes that all historical data points are equally relevant and should be considered equally when making the forecast. It does not prioritize more recent data or discard old data, but rather treats all data points equally in the calculation.

The correct answer is safety stock inventory. Safety stock inventory is not one of the four main types of inventory. The four main types of inventory are raw material inventory, work-in-process inventory, maintenance/repair/operating supply inventory, and finished goods inventory. Safety stock inventory is an additional inventory that is held as a buffer to protect against unexpected fluctuations in demand or supply. It is not considered one of the main types of inventory because it is not directly involved in the production or sale of goods.