Question 1

Safety inventory is defined as inventory held to satisfy demand that is higher than forecasted.

Accepted Answer

Safety inventory is held as a buffer against unexpected increases in demand. It is additional inventory held over and above the expected demand to ensure that demand can be met even if it is higher than what was forecasted. Therefore, the statement is true.

Question 2

To create an aggregate plan,a company must specify the planning horizon for the plan and the duration of each period within the planning horizon.

Accepted Answer

A planning horizon and duration of each period are necessary elements in creating an aggregate plan, so the statement is true.

Question 3

A poor aggregate plan can result in improved sales and profits if the available inventory and capacity are unable to meet demand.

Accepted Answer

A poor aggregate plan results in a mismatch between demand and available resources, which can lead to stockouts, backorders, and increased costs. This can harm customer relationships and decrease profitability in the long run.

Question 4

Aggregate planning is a process by which a company determines levels of capacity,production,subcontracting,inventory,stockouts,and even pricing over a specified time horizon.

Accepted Answer

This statement accurately defines aggregate planning.

Question 5

An aggregate plan that increases one cost typically results in the increase of the other two.

Accepted Answer

An aggregate plan aims to balance costs, so increasing one cost (e.g., labor) may decrease others (e.g., inventory or overtime) to maintain overall efficiency.

Question 6

The goal of aggregate planning is to satisfy demand in a way that minimizes profit.

Accepted Answer

The goal of aggregate planning is to satisfy demand in a way that maximizes profit.

Question 7

Aggregate planning solves problems involving aggregate decisions rather than stock keeping unit (SKU)level decisions.

Accepted Answer

Aggregate planning involves making decisions about overall levels of production, workforce, inventory, and other resources at a high level, rather than focusing on individual product SKUs. Therefore, the statement is true.

Question 8

A highly effective tool for a company to use when it tries to maximize profits while being subjected to a series of constraints is aggregate programming.

Accepted Answer

The correct term is "linear programming," which is used to maximize or minimize a linear objective function subject to constraints. Aggregate programming is not a recognized term in this context.

Question 9

A planning horizon is usually between three and five years.

Accepted Answer

The answer of A planning horizon is usually between three...

Question 10

A poor aggregate plan may result in a large amount of excess inventory and capacity,thereby raising costs.

Accepted Answer

A poor aggregate plan can result in overproduction and excess inventory, which increases carrying costs. It can also lead to underutilization of capacity, which reduces efficiency and increases fixed costs.

Question 11

The aggregate planner must make a trade-off between capacity,inventory,and backlog costs.

Accepted Answer

The aggregate planner must consider the costs associated with capacity, inventory, and backlog in order to make informed decisions about production and operations. Making trade-offs between these factors is a key aspect of effective aggregate planning.

Question 12

The aggregate planning problem is concerned with determining the production level,inventory level,and capacity level (internal and outsourced)for each period that maximizes the firm's profit over the planning horizon.

Accepted Answer

The statement accurately describes what the aggregate planning problem is.

Question 13

Traditionally,much of aggregate planning is focused within an enterprise and may not always be seen as a part of supply chain management.

Accepted Answer

Aggregate planning typically involves decisions about production, inventory, and workforce levels within a single company. While it can affect the overall supply chain, it may not always be seen as a direct part of supply chain management, which involves coordinating activities across multiple organizations.

Question 14

Most strategies that an aggregate planner actually uses are in combination,and are referred to as hybrid strategies.

Accepted Answer

Most aggregate planners use a combination of strategies, which are referred to as hybrid strategies.

Question 15

Safety capacity is defined as capacity used to satisfy demand that is lower than forecasted.

Accepted Answer

Safety capacity is actually defined as additional capacity used to handle unexpected demand, not to satisfy demand that is lower than forecasted.

Question 16

Forecasting errors are dealt with in aggregate plans using either safety backlog or safety capacity.

Accepted Answer

The answer of Forecasting errors are dealt with in aggregate...

Question 17

Short-term production serves as a broad blueprint for operations and establishes the parameters within which aggregate planning decisions are made.

Accepted Answer

Short-term production focuses on the immediate future, typically up to one year, and involves detailed planning of actual production activities, rather than serving as a broad blueprint for operations. Aggregate planning, on the other hand, is what establishes the broad parameters for operations over a medium-term horizon, balancing demand and capacity to optimize costs and resources.

Question 18

To improve the quality of these aggregate plans,forecast errors must be taken into account when formulating aggregate plans.

Accepted Answer

Forecast errors can greatly affect the accuracy of aggregate plans, so taking them into account can help improve the quality of the plans. This can be done by adjusting the plans based on how actual results differ from the forecasted results.

Question 19

Companies should work with downstream partners to produce forecasts and with upstream partners to determine constraints when doing aggregate planning.

Accepted Answer

Companies need to collaborate with both downstream and upstream partners to achieve a successful planning process. Downstream partners can provide valuable information about customer demand and market trends, while upstream partners can help determine production capacity and availability of raw materials. By involving all partners in the planning process, companies can develop a more accurate and effective plan.

Question 20

Aggregate planning is an important supply chain issue because,to be effective,it requires inputs from throughout the supply chain,but its results have little impact on the supply chain.

Accepted Answer

Aggregate planning has a significant impact on the supply chain as it involves determining production rates, workforce levels, and inventory levels, which affect the entire supply chain. Effective aggregate planning requires collaboration and coordination with suppliers, distributors, and customers, and its results directly impact the activities of these supply chain partners.

Quiz 8: Aggregate Planning in a Supply Chain