Chapter 9

Question 1

Predictable variability is

Answer 1

change in demand that can be forecasted.

Question 2

Which of the following is a problem caused by products experiencing predictable variability of demand?

Answer 2

• High levels of stockouts during peak demand
• high levels of excess inventory during periods of low demand
• Increased costs in the supply chain
• Decreased responsiveness of the supply chain

Question 3

A firm can handle predictable variability by managing

Answer 3

supply using capacity, inventory, subcontracting, and backlogs.
and
demand using short-term price discounts and trade promotions.

Question 4

Seasonal demand can be met by

Answer 4

• maintaining enough manufacturing capacity to meet demand in any period.
• building up inventory during the off season to meet demand during peak seasons.
• offering a price promotion during periods of low demand to shift some of the demand into a slow period.

Question 5

The advantage of maintaining enough manufacturing capacity to meet demand in any period is

Answer 5

very low inventory costs because no inventory needs to be carried from period to period.

Question 6

The disadvantage of maintaining enough manufacturing capacity to meet demand in any period is

Answer 6

much of the expensive capacity would go unused during most months when demand was lower.

Question 7

The advantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is

Answer 7

in the fact that a firm could get by with a smaller, less expensive factory.

Question 8

The disadvantage of building up inventory during the off season to meet demand during peak seasons and keep production stable year round is

Answer 8

very high inventory costs because inventory needs to be carried from period to period.

Question 9

The advantage of offering a price promotion during periods of low demand to shift some of the demand into a slow period is

Answer 9

a demand pattern that is less expensive to supply.

Question 10

Companies typically divide the task of supply and demand so that

Answer 10

Marketing manages demand and Operations manages supply.

Question 11

A firm can vary supply of product by controlling

Answer 11

production capacity and inventory.

Question 12

Which of the following is an approach that firms can use when managing capacity to meet predictable demand variability?

Answer 12

• Time flexibility from workforce
• Use of seasonal workforce
• Use of subcontracting
• Use of dual facilities–dedicated and flexible

Question 13

The capacity management approach that uses flexible work hours from the workforce to manage capacity to better meet demand is

Answer 13

time flexibility from workforce.

Question 14

the capacity management approach that uses a temporary workforce during the peak season to increase capacity to match demand is

Answer 14

the use of seasonal workforce.

Question 15

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

Answer 15

the use of subcontracting.

Question 16

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

Answer 16

the use of dual facilities–dedicated and flexible.

Question 17

The capacity management approach where a firm has production lines whose production rate can easily be varied to match demand is

Answer 17

designing product flexibility into the production processes.

Question 18

19) Which approach to capacity management may be hard to sustain if the labor market is tight?

Answer 18

Use of seasonal workforce

Question 19

Which approach to capacity management makes use of spare plant capacity that exists in the form of hours when the plant is not operational?

Answer 19

Time flexibility from workforce

Question 20

Which approach to capacity management makes use of overtime, which is varied to match the variation in demand?

Answer 20

Time flexibility from workforce

Question 21

Which approach to capacity management would schedule the workforce so that the available capacity better matches demand?

Answer 21

Time flexibility from workforce

Question 22

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?

Answer 22

Time flexibility from workforce

Question 23

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?

Answer 23

Use of subcontracting

Question 24

Which approach to capacity management would require that the workforce be multi-skilled and easily adapt to being moved from line to line?

Answer 24

Designing product flexibility into the production processes

Question 25

Which approach to capacity management would use production machinery that can be changed easily from producing one product to another?

Answer 25

Designing product flexibility into the production processes

Question 26

which approach to capacity management would only be effective if the overall demand across all the products is relatively constant?

Answer 26

Designing product flexibility into the production processes

Question 27

Which of the following is an approach that firms can use when managing inventory to meet predictable demand variability?

Answer 27

Using common components across multiple products

Question 28

When most of the products a firm produces have the same peak demand season, in order to meet predictable variability with inventory, it must

Answer 28

build inventory of high demand or predictable demand products.

Question 29

Supply chains can influence demand by using

Answer 29

pricing and other promotions.

Question 30

The pricing and promotion decisions are often made by

Answer 30

marketing and sales.

Question 31

The promotion and pricing decisions made by marketing and sales typically have the objective of

Answer 31

maximizing revenue.

Question 32

Pricing decisions based only on revenue considerations often result in

Answer 32

a decrease in overall profitability.

Question 33

When planning, the goal of all firms in the supply chain should be to maximize supply chain profits because

Answer 33

this leaves them more profit to divide among themselves.

Question 34

An increase in consumption of the product either from new or existing customers is

Answer 34

market growth.

Question 35

Customers substituting the firm’s product for a competitor’s product is

Answer 35

stealing share.

Question 36

Customers moving up future purchases to the present is

Answer 36

forward buying.

Question 37

In general, as the fraction of increased demand coming from forward buying grows, offering the promotion during the peak demand period becomes

Answer 37

less attractive.

Question 38

Offering a promotion during a peak period that has significant forward buying

Answer 38

creates a demand pattern even more costly to serve.

Question 39

Average inventory

Answer 39

increases if a promotion is run during the off-peak period.

Question 40

Promoting during a peak demand month may decrease overall profitability if

Answer 40

a significant fraction of the demand increase results from a forward buy.

Question 41

As the product margin declines, promoting during the peak demand period becomes

Answer 41

less profitable.

Question 42

In this approach to managing capacity, a firm uses a temporary workforce during the peak season to increase capacity to match demand.

Answer 42

Use of seasonal workforce

Question 43

Which of the following is a key factor influencing the timing of a product promotion?

Answer 43

• Cost of holding inventory
• Cost of changing the level of capacity
• Product margins

Question 44

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. what are these three factors?

Answer 44

• Forward buying
• Stealing share
• Market growth

Question 45

Which factor favors promotion during low-demand periods?

Answer 45

High forward buying
and
Low margin

Question 46

Which factor favors promotion during peak-demand periods?

Answer 46

high ability to increase overall market

Question 47

Four key factors influence the timing of a trade promotion:

Answer 47

-Impact of the promotion on demand
∙ Product margins
∙ Cost of holding inventory
∙ Cost of changing capacity