Question 1

Predictable variability is change in demand that cannot be forecasted.

Accepted Answer

Predictable variability is change in demand that can be forecasted. Unpredictable variability is change in demand that cannot be forecasted.

Question 2

A firm that purchases peak production capability from other companies is using subcontracting.

Accepted Answer

Subcontracting involves a company outsourcing parts of its production process to other companies or suppliers, which can include purchasing peak production capability from other companies.

Question 3

The use of a seasonal workforce is common in the tourism industry.

Accepted Answer

The tourism industry often experiences fluctuations in demand throughout the year, with busy seasons in the summer or during holidays. As a result, many businesses in the industry rely on a seasonal workforce to meet the needs of peak periods without incurring the cost of maintaining a full-time staff year-round. This practice is especially common in businesses such as hotels, restaurants, theme parks, and outdoor recreational venues.

Question 4

When performing aggregate planning,the goal of all firms in the supply chain should be to maximize individual firm profits.

Accepted Answer

The goal of aggregate planning should be to maximize the profitability of the entire supply chain, not just individual firms. This requires coordination and collaboration among all members of the supply chain to ensure that plans and decisions support the collective goal of optimizing the overall profitability of the network. Focusing solely on individual firm profits may result in suboptimal outcomes for the supply chain as a whole.

Question 5

Promoting during a peak demand month may decrease overall profitability if a significant fraction of the demand increase results from a forward buy.

Accepted Answer

If a significant fraction of the demand increase results from a forward buy, it means that customers are purchasing products in advance of their immediate needs, taking advantage of promotional pricing. After the promotion is over, demand may decrease, resulting in excess inventory and lower profits. Therefore, promoting during a peak demand month may decrease overall profitability if a significant fraction of the demand increase is due to forward buying.

Question 6

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.

Accepted Answer

When a company has enough manufacturing capacity to meet demand in any period, it can produce only what is needed and eliminate the need for carrying inventory from period to period. This reduces inventory costs, as there is no risk of excess inventory becoming obsolete or lost due to spoilage or theft. Therefore, the statement is true.

Question 7

Faced with predictable variability of demand,a company's goal is to respond in a manner that maximizes profitability.

Accepted Answer

To maximize profitability in the face of predictable variability of demand, a company must respond in a way that balances the cost of under or overstocking inventory, and the potential loss or opportunity cost of not meeting customer demand. This requires careful forecasting, inventory management, and operational efficiency.

Question 8

A firm that uses a temporary workforce during the peak season to increase capacity to match demand is using a seasonal workforce.

Accepted Answer

A seasonal workforce is used to match demand during specific times of the year or season. Temporary workers are often hired during peak seasons to handle the surge in demand, making it a seasonal workforce strategy.

Question 9

Determining how profits will be allocated to different members of the supply chain is a key to successful collaboration.

Accepted Answer

Determining profit allocation is crucial in establishing a fair and effective collaboration between members of the supply chain. It helps ensure that everyone is motivated to achieve common goals and that the benefits of the partnership are shared equitably. Without clear profit allocation methods and transparent communication, conflicts and disputes are likely to arise, undermining the ability of the supply chain to operate smoothly and deliver value to customers.

Question 10

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.

Accepted Answer

The answer of The disadvantage of building up inventory during...

Question 11

As forward buying becomes a smaller fraction of the demand increase from a promotion,it is less profitable to promote during the peak period.

Accepted Answer

The answer of As forward buying becomes a smaller fraction...

Question 12

Scheduling the workforce so that the available capacity better matches demand is using time flexibility from the workforce.

Accepted Answer

Scheduling the workforce to match demand is a form of time flexibility as it allows for a more efficient use of available capacity. By adjusting the work schedule of employees to meet peak demand times, businesses can optimize their productivity and profitability. This type of flexibility is becoming increasingly important in today's dynamic business environment, as companies need to be able to respond quickly and effectively to changing customer needs and market conditions.

Question 13

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.

Accepted Answer

This strategy is actually an example of increasing capacity flexibility through workforce management, not designing product flexibility into production processes. Product flexibility refers to the ability to produce a wide range of products without significant changeover time or costs.

Question 14

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.

Accepted Answer

By using pricing strategies to manage demand, a firm can ensure that they are able to sell their products at a higher price during periods of high demand. At the same time, they can use production and inventory management to ensure that they are able to meet this higher demand without losing too much in terms of production costs. By combining these strategies, a firm can improve their profitability even during times when demand fluctuates.

Question 15

Offering a promotion during a peak period that has significant forward buying creates even more variable demand than before the promotion.

Accepted Answer

Forward buying occurs when customers purchase products in advance of when they actually need them, often in response to a promotion or sale. Offering a promotion during a peak period can encourage even more forward buying, causing demand to be more unpredictable and variable.

Question 16

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

Accepted Answer

Offering the promotion during the peak demand period becomes less attractive because forward buying primarily shifts demand from future periods to the present, potentially cannibalizing sales at full price during the peak demand period.

Question 17

Pricing decisions based only on revenue considerations often result in an increase in overall profitability.

Accepted Answer

Pricing decisions based only on revenue considerations may lead to decreased profitability if the costs associated with producing the product or delivering the service are not taken into account. In some cases, lowering the price may also increase sales volume but decrease profit margin, leading to lower overall profitability. Therefore, pricing decisions should consider both revenue and cost factors to ensure optimal profitability.

Question 18

The use of dual facilities to manage capacity may be hard to sustain if the labor market is tight.

Accepted Answer

Using dual facilities to manage capacity involves having two separate locations or facilities for production or service delivery. This strategy requires sufficient labor to staff both facilities effectively. If the labor market is tight or there is a shortage of workers, it may be difficult to hire and retain enough staff to manage both facilities, making it hard to sustain this capacity management strategy. Therefore, the statement is true.

Question 19

A firm can vary supply of product by controlling production capacity and inventory.

Accepted Answer

A firm can control the supply of its product by adjusting its production capacity and managing inventory levels. By investing in more machinery, tools and labor, a firm can increase its production capacity and produce more units of its product. Similarly, by reducing production, a firm can limit its supply. Additionally, by managing inventory levels, a firm can ensure that it has enough products to meet demand without over-stocking, which can lead to excess costs.

Question 20

A firm that uses flexible work hours from the workforce to manage capacity to better meet demand is using a seasonal workforce.

Accepted Answer

Using flexible work hours from the workforce to manage capacity is not the same as using a seasonal workforce. A seasonal workforce typically involves hiring additional employees for a specific period of high demand, while flexible work hours involve adjusting existing employees' schedules to match demand fluctuations.

Quiz 9: Sales and Operations Planning: Planning Supply and Demand