Production Planning and Control
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Questions and Answers

What is the purpose of inventory in business?

  • To reduce customer satisfaction
  • To reduce production requirements
  • To minimize inventory storage capability
  • To contribute to customer satisfaction and support operations (correct)

    • Inventory is only necessary for manufacturing firms.

    False

    What is the formula for Little's Law?

    The average amount of inventory in a system is equal to the product of the average demand rate and the average time a unit is in the system.

    There are _______________ kinds of inventories.

    <p>six</p> Signup and view all the answers

    What is the purpose of inventory to decouple operations?

    <p>To allow for separate functioning of different departments</p> Signup and view all the answers

    Inventory management is only important for retail stores.

    <p>False</p> Signup and view all the answers

    Match the types of products with their descriptions:

    <p>Make to Order Products = many different end items are made from a small number of components Assemble to Order Products = many end items can be made from combinations of basic components and subassemblies</p> Signup and view all the answers

    What are the two types of products mentioned in the content?

    <p>Make to Order Products and Assemble to Order Products</p> Signup and view all the answers

    What is cycle stock?

    <p>Inventory that is intended to meet expected demand</p> Signup and view all the answers

    The annual demand requirements are unknown in the Economic Order Quantity (EOQ) model.

    <p>False</p> Signup and view all the answers

    What is the purpose of safety stock?

    <p>To reduce the probability of experiencing a stock-out</p> Signup and view all the answers

    The total annual value of an item is calculated by multiplying its ______________ demand by its unit cost.

    <p>annual</p> Signup and view all the answers

    Match the following inventory types with their descriptions:

    <p>Cycle Stock = Inventory that is intended to meet expected demand Safety Stock = Inventory that is held to reduce the probability of experiencing a stock-out</p> Signup and view all the answers

    What is the objective of the Economic Order Quantity (EOQ) model?

    <p>To identify the optimal order quantity</p> Signup and view all the answers

    There are quantity discounts in the Basic Economic Order Quantity model.

    <p>False</p> Signup and view all the answers

    What is the assumption about demand in the Basic Economic Order Quantity model?

    <p>Demand is spread evenly throughout the year so that the demand rate is reasonably constant</p> Signup and view all the answers

    What is the formula for Annual Holding Costs?

    <p>(Order Quantity in Units / 2) Holding (or carrying) Cost per annum</p> Signup and view all the answers

    The Economic Order Quantity (EOQ) assumes that orders are received incrementally during production.

    <p>False</p> Signup and view all the answers

    What are the three components of Total Cost in inventory management?

    <p>Carrying cost, Ordering cost, and Purchasing cost</p> Signup and view all the answers

    The _______________ point is the inventory level at which a new order is placed.

    <p>Reorder</p> Signup and view all the answers

    What is the purpose of a quantity discount?

    <p>To induce customers to buy in large quantities</p> Signup and view all the answers

    The EPQ model assumes that production occurs continually.

    <p>False</p> Signup and view all the answers

    Match the following inventory management concepts with their definitions:

    <p>EOQ = The optimal order quantity that minimizes total cost EPQ = The optimal production quantity that minimizes total cost Reorder Point = The inventory level at which a new order is placed Quantity Discounts = Price reductions for larger orders</p> Signup and view all the answers

    What is the determinant of Reorder Point Quantity?

    <p>The rate of demand (usually based on a forecast)</p> Signup and view all the answers

    What is the primary purpose of the master schedule in production planning and control?

    <p>To determine the quantities needed to meet demand from all sources</p> Signup and view all the answers

    The master schedule is used to negotiate with customers when their requests cannot be met by normal capacity.

    <p>True</p> Signup and view all the answers

    What is one of the duties of a master scheduler?

    <p>Evaluating the impact of new orders</p> Signup and view all the answers

    The production plan, forecasts for individual end items, and actual orders received from customers are all examples of ______________ needed by a master production system.

    <p>information</p> Signup and view all the answers

    What is the purpose of the master scheduler revising the master schedule when necessary?

    <p>Because of insufficient supplies or capacity</p> Signup and view all the answers

    The master schedule is used only for production planning.

    <p>False</p> Signup and view all the answers

    Match the following duties of a master scheduler with their descriptions:

    <p>Evaluating the impact of new orders = Determining the delivery dates for orders Providing delivery dates for orders = Dealing with problems such as production delays Dealing with problems = Evaluating the impact of new orders and providing delivery dates for orders</p> Signup and view all the answers

    What is the time period used by the Hotshot Lightning Rod Company for production planning?

    <p>Weeks</p> Signup and view all the answers

    What is the primary definition of quality in operational terms?

    <p>The degree to which performance of a product or service meets or exceeds customer expectations</p> Signup and view all the answers

    There are 5 dimensions of product quality.

    <p>False</p> Signup and view all the answers

    What is reliability in terms of product quality?

    <p>Dependable performance.</p> Signup and view all the answers

    The _______________ of facilities, equipment, personnel, and communication materials is one of the dimensions of service quality.

    <p>physical appearance</p> Signup and view all the answers

    What is the tool used for assessing service quality?

    <p>SERVQUAL</p> Signup and view all the answers

    Convenience is a dimension of product quality.

    <p>False</p> Signup and view all the answers

    What is the importance of recognizing the consequences of poor quality in operations management?

    <p>Recognizing the consequences of poor quality is important to understand the costs and benefits of quality.</p> Signup and view all the answers

    Match the dimensions of product quality with their descriptions:

    <p>Performance = Main characteristics of the product Aesthetics = Appearance, feel, smell, taste Reliability = Dependable performance Conformance = How well a product corresponds to design specifications</p> Signup and view all the answers

    Study Notes

    Master Schedule

    • The master schedule is the heart of production planning and control, determining quantities needed to meet demand from all sources.
    • It enables marketing to make valid delivery commitments to warehouses and final customers.
    • It enables production to evaluate capacity requirements.
    • It provides necessary information for production and marketing to negotiate when customer requests cannot be met by normal capacity.
    • It provides senior management with the opportunity to determine whether the business plan and strategic objectives will be achieved.

    Functions of Master Scheduler

    • Evaluating the impact of new orders.
    • Providing delivery dates for orders.
    • Dealing with problems, including evaluating the impact of production delays or late deliveries, revising the master schedule, and bringing instances of insufficient capacity to the attention of production and marketing personnel.

    Information Needed by Master Production System

    • The production plan.
    • Forecasts for individual end items.
    • Actual orders received from customers and for stock replenishment.
    • Inventory levels for individual end items.
    • Capacity restraints.

    Inventory Management

    • Inventory is a vital part of business, contributing to customer satisfaction.
    • Kinds of inventories include raw materials, partially completed goods, finished-goods inventories, tools and supplies, maintenance and repairs, and goods-in-transit.
    • Functions of inventory include meeting anticipated customer demand, smoothing production requirements, decoupling operations, protecting against stockouts, taking advantage of order cycles, hedging against price increases, and permitting operations.

    Little's Law

    • The average amount of inventory in a system is equal to the product of the average demand rate and the average time a unit is in the system.

    Inventory Ordering Policies

    • Cycle stock is inventory intended to meet expected demand.
    • Safety stock is inventory held to reduce the probability of experiencing a stock-out due to demand and/or lead time variability.

    Economic Order Quantity (EOQ)

    • Identifies the optimal order quantity by minimizing the sum of certain annual costs that vary with order size and order frequency.
    • Assumptions of the basic EOQ include:
      • Only one product is involved.
      • Annual demand requirements are known.
      • Demand is spread evenly throughout the year.
      • Lead time is known and constant.
      • Each order is received in a single delivery.
      • There are no quantity discounts.
    • Annual holding costs = (Order Quantity in Units / 2) Holding (or carrying) Cost per annum.
    • Annual ordering costs = (Demand in units per year / Order Quantity in Units) Ordering Cost per order.
    • Total cost = Annual holding costs + Annual ordering costs.
    • Optimal order quantity = √2Do / C.

    Economic Production Quantity (EPQ)

    • Similar to EOQ, except units are received incrementally during production.
    • Assumptions of EPQ include:
      • Only one item is involved.
      • Annual demand is known.
      • The usage rate is constant.
      • Usage occurs continually, but production occurs periodically.
      • The production rate is constant.
      • Lead time does not vary.
      • There are no quantity discounts.

    Reorder Point Ordering

    • Occurs when the quantity on hand drops to a predetermined amount.
    • Determinants of reorder point quantity include:
      • The rate of demand (usually based on a forecast).

    Quality Management

    • Quality is the degree to which performance of a product or service meets or exceeds customer expectations.
    • Dimensions of product quality include:
      • Performance.
      • Aesthetics.
      • Special features.
      • Conformance.
      • Reliability.
      • Durability.
      • Perceived quality.
      • Serviceability.
    • Dimensions of service quality include:
      • Convenience.
      • Reliability.
      • Responsiveness.
      • Time.
      • Assurance.
      • Courtesy.
      • Tangibles.
      • Consistency.
    • Assessing service quality using SERVQUAL, a widely used tool.

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    Description

    This quiz covers the concepts of production planning and control, including the master schedule and its importance in meeting demand. It also touches on mathematical techniques and models used in production planning.

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