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Exam 10: Sales and Operations Planning Aggregate Planning

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Question 1

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It costs $10 to make a single unit using regular production and $15 to make a single unit using overtime production.Finished units sell for $17 and are built to order.The manufacturing plant has a regular production capacity of 250 units per month and no inventory at the start of the planning period.What is the BEST net cash flow for the entire planning period if the manufacturer uses a chase plan?

A) $6,800
B) $7,050
C) $7,300
D) $7,550

E) A) and B)
F) B) and D)

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Question 2

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What is the purpose of S&OP and what takes place at the strategic,tactical,and detailed planning and control levels?

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Sales and operations planning is a business process that helps the firm plan and coordinate operations and supply chain decisions over a tactical time horizon.The objective of this is to agree on a single operating plan that allocates critical resources of people,capacity,materials,time and money to most effectively meet the marketplace in a profitable way. Strategic decisions are made on a long-term basis,much longer than S&OP can be done practically,however the process choice and market decisions made at this level will shape the firm's ability to generate and to meet demand.The tactical level,usually four months to a year out,is where workforce,inventory,subcontracting and logistics decisions are made.Planning numbers are aggregated month by month for the purpose of generating a sales and operations plan.Finally,the time period for the detailed planning and control level may be as short as hours or as long as weeks ahead.The planning done at this level may be as simplistic as which job to run next with the capacity that was provided by the tactical level planning.

Question 3

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Sales and operations planning indicates how the organization will use its tactical capacity resources to meet expected customer demand.

A routine flight from LaGuardia Airport to Will Rogers Airport may have passengers that have paid radically different ticket prices.These prices fluctuate based on an approach called yield management.

Create a level plan with a zero ending inventory for the forecast shown in the table.There is no beginning inventory and regular production capacity is 300 units.Overtime costs $15 extra and is limited to 25 units per month and subcontracting is limited to 60 units per month and costs $10 per unit.Back orders cost $50 per unit and there is a cost of $5 per month to hold a unit in inventory.What is the total plan cost?

How can and why should a firm link S&OP throughout the supply chain?

A company that makes the rocket widget has one machine capable of producing this unique item.The machine requires an attendant,who works 40 hours a week for $12 per hour and has made himself available for a maximum of 8 hours of overtime.It costs $20 per hour to run the machine and it is capable of producing 10,000 rocket widgets per hour.The widgets sell for $10 per hundred and cost $1 per hundred in materials.If the production manager wishes to develop a sales and operations plans using an optimization model,which of the following statements is valid?

Sales and operations plans must be updated as time progresses,so most firms establish a(n)________.

An organization that meets seasonal swings in demand by hiring and then laying off temporary workers while maintaining a few full-time permanent workers is employing a(n)________ strategy.

It costs $12 to make a single unit using regular production and $15 to make a single unit using overtime production.Total overtime production is limited to 500 units for the five month period.The manufacturing plant has a regular production capacity of 250 units per month and 50 units in inventory at the start of the planning period.There is a $5 per unit charge for holding inventory at the end of each month and a limit of 250 units ending inventory for any period.Develop a minimum cost production plan if the forecast must be met and costs must be minimized.

An organization has developed three alternate sales and operations plans for the coming six months and now must choose between them.They should consider:

Each entity in a supply chain should produce its own sales and operations plan independent of the other members in order to improve the overall cost performance in a supply chain.

What is the ending inventory level for April in the production plan shown in the table? All entries in the table are in terms of sales units.

In order for ________ planning to work,the mix of products or services must be essentially the same from one time period to the next or the products must have very similar resource requirements.

Regular production costs $25 per unit and selling a unit represents a cash inflow of $30 per unit.Assume that all units reflected on the forecast will be sold.What is the cumulative net cash flow at the end of April?

There are three phases to sales and operations planning implementation.The first phase,during which employees are trained,information systems implemented,and ideal products are identified for initial efforts is called ________.

Last month,the sales and operations plan showed projections from January through April.This month,the sales and operations plan shows projections from February through May.This is an example of a rolling planning horizon.

As potato harvest season approaches,the number of year-round llama wranglers is insufficient to meet the demand,so a few wranglers are hired just for the month it takes to haul the harvest down from the mountains to the anxious potato-festival crowd.This approach to meeting the labor requirements is called:

A(n)________ limits our ability to increase profits or cut costs by reducing the set of possible solutions in an optimization model.

Sales and operations planning is a necessary task for all companies,but is never a source of competitive advantage.