Chapter 9 Sales and Operations Planning: Planning Supply and Demand in a Supply

Chain
9.2 Multiple Choice Questions
1) Predictable variability is
A) change in demand that can be forecasted.
B) change in demand that cannot be forecasted.
C) change in demand that has been planned.
D) change in demand that has been scheduled.
2) A firm can handle predictable variability by managing
A) supply using capacity, inventory, trade promotions, and backlogs.
B) supply using capacity, inventory, subcontracting, and backlogs.
C) demand using short-term price discounts and trade promotions.
D) B and C only
3) Seasonal demand can be met by
A) maintaining enough manufacturing capacity to meet demand in any period.
B) building up inventory during the off season to meet demand during peak seasons.
C) offering a price promotion during periods of low demand to shift some of the demand into a
slow period.
D) all of the above
4) The advantage of maintaining enough manufacturing capacity to meet demand in any
period is
A) very low inventory costs because inventory needs to be carried from period to period.
B) very low inventory costs because no inventory needs to be carried from period to period.
C) very high inventory costs because no inventory needs to be carried from period to period.
D) very high inventory costs because expensive capacity would go unused during most months
when demand was lower.
5) The disadvantage of maintaining enough manufacturing capacity to meet demand in
any period is

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A) much of the expensive capacity would go unused during most months when demand was
lower.
B) the expensive capacity would be used consistently throughout the year.
C) most of the expensive capacity would still be used during most months when demand was
lower.
D) very low inventory costs because no inventory needs to be carried from period to period.
6) The advantage of building up inventory during the off season to meet demand during
peak seasons and keep production stable year round is
A) very low inventory costs because no inventory needs to be carried from period to period.
B) much of the expensive capacity would go unused during most months when demand was
lower.
C) in the fact that a firm could get by with a smaller, less expensive factory.
D) in the fact that a firm could get by with a larger, more expensive factory.
7) The disadvantage of building up inventory during the off season to meet demand
during peak seasons and keep production stable year round is
A) very low inventory costs because no inventory needs to be carried from period to period.
B) very high inventory costs because inventory needs to be carried from period to period.
C) in the fact that a firm could get by with a smaller, less expensive factory.
D) in the fact that a firm could get by with a larger, more expensive factory.
8) The advantage of offering a price promotion during periods of low demand to shift
some of the demand into a slow period is
A) a demand pattern that is less expensive to supply.
B) very high inventory costs because inventory needs to be carried from period to period.
C) in the fact that a firm could get by with a smaller, more expensive factory.
D) much of the expensive capacity would go unused during most months when demand was
lower.
9) Companies typically divide the task of supply and demand so that
A) Marketing manages demand and Operations manages supply.
B) Marketing manages supply and Operations manages demand.

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C) Marketing manages demand and supply.
D) Operations manages demand and supply.
10) With supply and demand management decisions being made independently,
A) it is increasingly difficult to coordinate the supply chain, thereby increasing profit.
B) it is increasingly difficult to coordinate the supply chain, thereby decreasing profit.
C) it is easier to coordinate the supply chain, thereby decreasing profit.
D) it is easier to coordinate the supply chain, thereby increasing profit.
11) ________ variability is change in demand that can be forecasted.
A) Capacity B) Predictable C) Inventory D) Backlog
12) A firm can vary supply of product by controlling
A) inventory. B) pricing. C) demand. D) revenue.
13) A firm can vary supply of product by controlling
A) revenue. B) pricing. C) demand. D) capacity.
14) In this approach to managing capacity, a firm uses flexible work hours by the
workforce to manage capacity to better meet demand.
A) Time flexibility from workforce B) Use of seasonal workforce
C) Use of subcontracting D) Use of dual facilities–specialized and flexible
15) In this approach to managing capacity, a firm uses a temporary workforce during
the peak season to increase capacity to match demand.
A) Time flexibility from workforce B) Use of subcontracting
C) Use of dual facilities–specialized and flexible D) Use of seasonal workforce
16) In this approach to managing capacity, a firm subcontracts peak production so that
internal production remains level and can be done cheaply.
A) Time flexibility from workforce B) Use of subcontracting
C) Use of dual facilities–specialized and flexible D) Use of seasonal workforce
17) In this approach to managing capacity, a firm has flexible production lines whose
production rate can easily be varied.
A) Time flexibility from workforce B) Use of subcontracting

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C) Designing product flexibility into the production processes
D) Use of seasonal workforce
18) A firm can vary supply of product by controlling
A) production capacity and inventory.
B) production capacity and price promotions.
C) price promotions and inventory.
D) production capacity and inventory promotions.
19) The capacity management approach that uses flexible work hours from the
workforce to manage capacity to better meet demand is
A) time flexibility from workforce. B) use of seasonal workforce.
C) use of subcontracting. D) use of dual facilities—dedicated and flexible.
20) The capacity management approach that uses a temporary workforce during the
peak season to increase capacity to match demand is
A) time flexibility from workforce. B) the use of seasonal workforce.
C) the use of subcontracting. D) the use of dual facilities—dedicated and flexible.
21) The capacity management approach where a firm purchases peak production from
another firm so that internal production remains level and can be done cheaply is
A) time flexibility from workforce. B) the use of seasonal workforce.
C) the use of subcontracting. D) the use of dual facilities—dedicated and flexible.
22) The capacity management approach where a firm builds facilities to produce a
relatively stable output of products over time in a very efficient manner and facilities to
produce a widely varying volume and variety of products, but at a higher unit cost is
A) time flexibility from workforce. B) the use of seasonal workforce.
C) the use of subcontracting. D) the use of dual facilities—dedicated and flexible.
23) The capacity management approach where a firm has production lines whose
production rate can easily be varied to match demand is
A) time flexibility from workforce. B) the use of seasonal workforce.
C) the use of subcontracting.
D) designing product flexibility into the production processes.

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24) Which approach to capacity management may be hard to sustain if the labor market
is tight?
A) Time flexibility from workforce B) Use of seasonal workforce
C) Use of subcontracting D) Use of dual facilities—dedicated and flexible
25) Which approach to capacity management makes use of spare plant capacity that
exists in the form of hours when the plant is not operational?
A) Time flexibility from workforce B) Use of seasonal workforce
C) Use of subcontracting D) Use of dual facilities—dedicated and flexible
26) Which approach to capacity management makes use of overtime, which is varied to
match the variation in demand?
A) Time flexibility from workforce B) Use of seasonal workforce
C) Use of subcontracting D) Use of dual facilities—dedicated and flexible
27) Which approach to capacity management would schedule the workforce so that the
available capacity better matches demand?
A) Time flexibility from workforce B) Use of seasonal workforce
C) Use of subcontracting D) Use of dual facilities—dedicated and flexible
28) Which approach to capacity management would use a part-time workforce to
increase capacity flexibility by enabling the firm to have more people at work during
peak periods?
A) Time flexibility from workforce B) Use of seasonal workforce
C) Use of subcontracting D) Use of dual facilities—dedicated and flexible
29) The key to which capacity management approach would involve having both volume
(fluctuating demand from a manufacturer) and variety flexibility (demand from several
manufacturers) to be sustainable?
A) Time flexibility from workforce B) Use of seasonal workforce
C) Use of subcontracting D) Use of dual facilities—dedicated and flexible
30) Which approach to capacity management would require that the workforce be multi-
skilled and easily adapt to being moved from line to line?
A) Time flexibility from workforce B) Use of seasonal workforce
C) Use of dual facilities—dedicated and flexible

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D) Designing product flexibility into the production processes
31) Which approach to capacity management would use production machinery that can
be changed easily from producing one product to another?
A) Time flexibility from workforce B) Use of subcontracting
C) Use of dual facilities—dedicated and flexible
D) Designing product flexibility into the production processes
32) Which approach to capacity management would only be effective if the overall
demand across all the products is relatively constant?
A) Use of seasonal workforce B) Use of subcontracting
C) Use of dual facilities—dedicated and flexible
D) Designing product flexibility into the production processes
33) Which of the following is an approach that firms can use when managing inventory
to meet predictable demand variability?
A) Time flexibility from workforce B) Use of seasonal workforce
C) Use of subcontracting
D) Using common components across multiple products
34) When most of the products a firm produces have the same peak demand season, in
order to meet predictable variability with inventory, it must
A) use common components across multiple products. B) use a seasonal workforce.
C) build inventory of high demand or predictable demand products.
D) use subcontracting.
35) Supply chains can influence demand by using
A) production capacity and inventory. B) pricing and other promotions.
C) price promotions and inventory. D) production capacity and inventory promotions.
36) The pricing and promotion decisions are often made by
A) marketing and sales. B) marketing and operations.
C) operations and sales. D) marketing, operations, and sales.

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37) The promotion and pricing decisions made by marketing and sales typically have the
objective of
A) maximizing profitability. B) minimizing profitability.
C) minimizing revenue. D) maximizing revenue.
38) Pricing decisions based only on revenue considerations often result in
A) a decrease in overall profitability. B) an increase in overall profitability.
C) a decrease in overall revenue. D) a decrease in supply chain revenue.
39) When planning, the goal of all firms in the supply chain should be to maximize
supply chain profits because
A) this leaves them less profit to divide among themselves.
B) this leaves them more profit to divide among themselves.
C) this outcome leaves them more profit to pay tax on.
D) this outcome will increase their charitable giving.
40) One key to successful collaboration when the supply chain is performing aggregate
planning is
A) determining how losses will be allocated to different members of the supply chain.
B) determining how profits will be allocated to different members of the supply chain.
C) determining how labor will be allocated to different members of the supply chain.
D) determining how customers will be allocated to different members of the supply chain.
41) An increase in consumption of the product either from new or existing customers is
A) market growth. B) stealing share.
C) forward selling. D) forward buying.
42) Customers substituting the firm's product for a competitor's product is
A) market growth. B) stealing share.
C) forward selling. D) forward buying.
43) Customers moving up future purchases to the present is
A) market growth. B) stealing share.
C) forward selling. D) forward buying.

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44) In general, as the fraction of increased demand coming from forward buying grows,
offering the promotion during the peak demand period becomes
A) less attractive. B) more attractive.
C) more profitable. D) less significant.
45) Offering a promotion during a peak period that has significant forward buying
A) creates a desirable demand pattern.
B) creates a demand pattern less costly to serve.
C) creates a demand pattern even more costly to serve.
D) shifts demand from the peak period to the slow period.
46) Average inventory
A) increases if a promotion is run during the peak period.
B) increases if a promotion is run during the off-peak period.
C) decreases if a promotion is run during the peak period.
D) decreases if a promotion is run during the off-peak period.
47) Promoting during a peak demand month may decrease overall profitability if
A) a small fraction of the demand increase results from a forward buy.
B) any of the demand increase results from a forward buy.
C) a significant fraction of the demand increase results from a forward buy.
D) none of the above
48) As the product margin declines, promoting during the peak demand period becomes
A) less profitable. B) more profitable.
C) less of a risk. D) more desirable.
49) Which factor favors promotion during low-demand periods?
A) High forward buying B) High ability to steal market share
C) High ability to increase overall market D) High margin
50) Which factor favors promotion during low-demand periods?
A) High margin B) High ability to steal market share

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C) High ability to increase overall market D) Low margin
51) Which factor favors promotion during peak-demand periods?
A) High margin B) Low ability to steal market share
C) High ability to increase overall market D) Low margin