5 Questions
What is the primary objective of increasing production quantity when customer orders exceed forecasted quantity?
To meet the extra demand
What type of production planning strategy is used when producing a finished good based on a forecast?
Make-to-stock production
What happens when customer orders exceed the forecasted quantity in a make-to-stock production strategy?
Production quantity is increased to try to meet the extra demand
Which of the following is NOT a characteristic of make-to-stock production?
Producing a good only when customers place an order
What is the potential consequence of not increasing production quantity when customer orders exceed forecasted quantity in a make-to-stock production strategy?
Stockouts and lost sales
Study Notes
Production Planning Strategy
- The company produces a finished good based on a forecast and holds it in stock until customers place orders.
- When customer orders exceed the forecasted quantity, the production quantity is increased to attempt to meet the additional demand.
- The production planning strategy used in this scenario is Make-to-Stock production.
Identify the correct production planning strategy based on customer orders and forecasted quantities. Choose the correct answer to determine whether to produce to order or to stock.
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