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SCM 186 Exam 2 With Complete Solutions 100% Verified
Process of predicting a future event. It is the underlying basis of all business decisions. What is forecasting?
Design new production process, add long lead time equipment, acquire or sell facilities Long Range Planning
Subcontract, add or sell equipment, add or reduce shifts, build or use inventory, training. Intermediate Range Planning
Schedule jobs, schedule personnel, allocate machinery Short Range Planning
Up to 1 year, generally less than 3 months Short Range Time Horizon
3 Months to 3 years Medium Range Time Horizon
3+ years Long range Time Horizon
True Medium / Long range deal with more comprehensive issues
This is true Short terms range usually employs different methedologies than long term forecasting
Technological forecasts, economic forecasts, and demand forecasts What are the three types of business forecasts
Predict rate of technological process. Impacts development of new products Technological forecasts
Address business cycle - inflation rate, money supply, housing stats, etc Economic Forecasts
Predict sales of existing products and services Demand Forecasts
Supply chain management; Good supplier relations What are the strategic performance of Technological Forecasts?
Human resources; Hiring, training, and laying off workers What is the strategic importance of economic forecasts?
Capacity; such as capacity shortages or capacity surpluses What is the strategic importance of demand forecasts?
Make the forecast What is the sixth step in seven steps of forecasting
Validate and implement the results What is the seventh step in the seven steps of forecasting
Used when situation is vague and little data exists. Example is new products or new technology Qualitative methods
Used when situation is stable and historical data exist. Example is existing products / current technology Quantitative methods
Jury of executive opinion, delphi method, sales force composite, and market survey What are the four components of the overview of quantitative methods?
Pool oppinions of high level experts, sometimes augmented by statistical methods What is the jury of executive opinion?
Panel of experts, queued iteratively What is the delphi method?
Estimates form and individual salespersons are reviewed for reasonableness, then agregated What is the sales force composite?
Ask the customer What is a market survey?
True With the delphi method, the iterative group process continues util consensus is reached
Staff, respondants, and decision makers Three types of participants:
Naive approach, moving averages, exponential soothing, trend projection, and linear regression What are the five quantitative approaches?
Contains naive approach, moving averages, exponential soothing, trend projection, and linear regression; it is a set of evenly spaced numerical data. Forecast is focused only on past values
Form of weighted moving average; uses recent errors instead of data. Result is that most recent data is weighted most. Requires a smoothing constant, involves little record keeping of past, assumes future will be dependent on the past, and is based on idea that previous forecast errors are useful. Exponential soothing
Lower costs but increases chances of shortages which can worsen customer service When dealing with the importance of inventory, what does less inventory cause?
Causes raised prices but improves the likelhood of marketing process which leads to better customer service When dealing with the importance of inventory, what does more inventory cause?
To strike a balance between inventory investment and customer service What is the objective of inventory management?
- To provide a selection of goods anticipated demand and to seperate the firm from fluctuations in demand.
- To decouple or seperate various parts of the production process
- To take advantage of quantity discounts
- To hedge against inflation What are the four functions of inventory?
We have an expert-written solution to this problem! Raw material, work in process, maintenance/repair/operating (MRO), and finished goods What are the types of inventory
Purchased but not processed What are raw materials
Undergone some change but not completed Work in process
Necessary to keep machinery and processes productive Maintenance / repair / operating (MRO);
Divides inventory into three based on annual dollar volume ABC Analysis
High annual dollar volume Class A (ABC Analysis)
The demand for the item is independent of the demand for any other item in inventory Independent Demand
The demand for item is independent upon the demand for some other item in the inventory Dependent Demand
The costs of holding of "carrying" the inventory over time Holding costs
The costs of placing an order and receiving goods Ordering costs
Cost to prepare a machine or process for manufacturing an order Setup Costs
- demand is known, constant, and independent
- lead time is known and constant
- receipt of inventory is instantaneous and complete
- quantity discounts are not possible
- only variable costs are setup and holding
- stockouts can be completely avoided EQQ Model Assumptions
True A forecast is just the point estimate of a future value
A forecast This point is actually the mean or expected value of a probability distribution
Help make better decisions EQQ and ROP models...
The demand for the item is dependent upon the demand for some other item in the inventory Dependent Demand
For any well defined product for which a schedule can be established. Dependent demand techniques should be used What is dependent demand for?
Materials Requirement Planning (MRP)
Components, or children What are items called when below given level
Strategically alters lead times and precisely places safety stock within the bam structure to improve mRP performance, can improve stockouts, and liability Demand driven MRP:
Data enriched by other resources; outputs can include scrap, effluent, and carbon emissions. Data is used by purchasing production, scheduling, capacity planning, inventory, warehouse management MRP 2:
Restaurants, hospitals, and hotels Dependent demand service items
