Operations Management, 12e (Heizer/Render/Munson)
Chapter 13 Aggregate Planning and S&OP
Section 1 The Planning Process
1) Plans for new product development generally fall within the scope of aggregate planning.
2) The aggregate planning process usually includes dispatching of individual jobs.
3) Frito-Lay uses aggregate planning to match capacity with demand because of the ________ associated
with its specialized processes.
A) high variable cost and high fixed cost
B) high variable cost and low fixed cost
C) low variable cost and high fixed cost
D) low variable cost and low fixed cost
E) none of the above
4) Under which of the following do planning tasks associated with job assignments, ordering, job
scheduling, and dispatching typically fall?
A) short-range plans
B) intermediate-range plans
C) long-range plans
D) mission-related planning
E) strategic planning
5) Under which of the following do planning tasks associated with production planning and budgeting,
as well as setting employment, inventory, and subcontracting levels, typically fall?
A) short-range plans
B) intermediate-range plans
C) long-range plans
D) demand options
E) strategic planning
6) Top executives tend to focus their attention on which type of forecasts?
A) short-range
B) intermediate-range
C) long-range
D) weather
E) the forecast for the next day’s absentee levels
7) Which of the following would most likely fall under the scope of only an operations manager?
A) research and development
B) new product plans
C) capital investments
D) facility location/capacity
E) setting inventory levels
1) Aggregate planning occurs over the medium or intermediate future of 3 to 18 months.
2) Aggregate planning in manufacturing ties organizational strategic goals to a production plan.
3) One of the four things needed for aggregate planning is a logical overall unit for measuring sales and
output.
4) What is the typical time horizon for aggregate planning?
A) less than a month
B) up to 3 months
C) 3 to 18 months
D) over one year
E) over 5 years
5) Which of the following is the term used for intermediate-range capacity planning with a time horizon
of three to eighteen months?
A) material requirements planning
B) enterprise resource planning
C) strategic planning
D) aggregate planning
E) job scheduling
6) Which of the following is NOT one of the four things needed for aggregate planning?
A) a logical overall unit for measuring sales and output
B) a method to determine the relevant costs
C) a mathematical model that will minimize costs over the intermediate planning period
D) an aggregate demand forecast for an intermediate planning period
E) All of these are needed for aggregate planning.
7) What is the effort to plan the coordination of demand forecasts with functional areas of the firm and its
supply chain?
A) enterprise resource planning
B) material requirements planning
C) capacity planning
D) sales and operations planning
E) new product development
8) Which of the following is NOT an input to S&OP?
A) capacity decisions
B) supply-chain support
C) workforce
D) inventory on hand
E) master production schedule
9) ________ is an approach to determine the quantity and timing of production for the intermediate
future.
10) What four things are needed to develop an aggregate plan?
11) What is the typical planning horizon for aggregate planning?
Section 3 The Nature of Aggregate Planning
1) The objective of aggregate planning is usually to meet forecast demand while smoothing employment
and driving down inventory levels over the planning period.
2) Disaggregation is the process of breaking the aggregate plan into greater detail; one example of this
detail is the master production schedule.
3) The objective of aggregate planning is to meet forecast demand while ________ over the planning
period.
A) minimizing cost
B) maximizing service level
C) minimizing stock out
D) minimizing fixed cost
E) all of the above
4) Disaggregation:
A) breaks the aggregate plan into greater detail.
B) transforms the master production schedule into an aggregate plan.
C) calculates the optimal price points for yield management.
D) converts product schedules and labor assignments to a facility-wide plan.
E) is an assumption required for the use of the transportation model in aggregate planning.
5) Aggregate planning would entail which of the following production aspects at BMW for a 12–month
period?
A) number of cars with a hi-fi stereo system to produce
B) number of two-door vs. four-door cars to produce
C) number of green cars to produce
D) total number of cars to produce
E) B, C, and D
6) An aggregate plan satisfies forecast demand by potentially adjusting all EXCEPT which of the
following?
A) production rates
B) labor levels
C) inventory levels
D) overtime work
E) facility capacity
7) What directly results from disaggregation of an aggregate plan?
A) a master production schedule
B) priority scheduling
C) a transportation matrix
D) a capacity-demand matrix
E) detailed work schedules
8) ________ is the process of breaking the aggregate plan into greater detail.
9) A(n) ________ is the result of the disaggregation of an aggregate plan.
10) What is disaggregation?
1) One question that operations managers must answer when generating an aggregate plan is whether
prices or other factors should be changed to influence demand.
2) One of the demand options of aggregate planning is to vary the workforce by hiring or layoffs.
3) The strategies of aggregate planning are broadly divided into demand options and capacity options.
4) In aggregate planning, the amount of overtime and the size of the work force are both adjustable
elements of capacity.
5) When developing an aggregate plan, one of the adjustable elements of capacity is the extent of
subcontracting.
6) One motive for using demand-influencing aggregate planning options is to create uses for excess
capacity within an organization.
7) The use of part-time workers as an aggregate planning option may be less costly than using full-time
workers, but it may also reduce quality levels.
8) Advertising and promotion are methods of manipulating product or service supply in aggregate
planning.
9) Because service firms do not inventory their output, a chase strategy is not appropriate.
10) The level scheduling strategy allows lower inventories than the pure chase strategy.
11) Mixed strategies in aggregate planning may utilize inventory, work force, and production rate
changes over the planning horizon.
12) Finding an ideal mixed strategy is complicated by the huge number of possible strategies.
13) Dependence on an external source of supply is found in which of the following aggregate planning
strategies?
A) varying production rates through overtime or idle time
B) subcontracting
C) using part-time workers
D) back ordering during high demand periods
E) hiring and laying off
14) Which of these is among the demand options of aggregate planning?
A) subcontracting
B) back-ordering during high-demand periods
C) changing inventory levels
D) varying workforce size
E) varying production rates through overtime or idle time
15) In the service sector, which of the following aggregate planning strategies might direct your client to a
competitor?
A) using part-time workers
B) subcontracting
C) changing inventory level
D) varying production rates through overtime or idle time
E) varying work force size by hiring or layoffs
16) Which of the following aggregate planning strategies is a capacity option?
A) influencing demand by changing price
B) counterseasonal product mixing
C) influencing demand by extending lead times
D) changing inventory levels
E) influencing demand by back ordering
17) Which of these aggregate planning strategies is a capacity option?
A) back ordering
B) using part-time workers
C) counterseasonal product mixing
D) changing price
E) promotion
18) Which of the following aggregate planning strategies is known to lower employee morale?
A) yield management
B) counterseasonal product and service mixing
C) changing inventory levels
D) varying work force size by hiring or layoffs
E) back ordering during high demand periods
19) Which of the following aggregate planning options is NOT associated with manipulation of product
or service demand?
A) price cuts or discounts
B) promotion
C) subcontracting
D) counterseasonal products or services
E) advertising
20) Which of the following aggregate planning options attempts to manipulate product or service
demand?
A) inventories
B) part-time workers
C) subcontracting
D) overtime/idle time
E) price cuts
21) Which of the following aggregate planning strategies is a demand option?
A) changing price
B) subcontracting
C) varying production levels
D) changing inventory levels
E) using part-time workers
22) In aggregate planning, which one of the following is not a basic option for altering demand?
A) promotion
B) subcontracting
C) back ordering
D) pricing
E) personal selling
23) Which choice below best describes the counterseasonal product demand option?
A) producing such products as lawnmowers and sunglasses during the winter
B) developing a mix of products that smoothes out their demands
C) lowering prices when demand is slack
D) using subcontractors only when demand is excessive
E) the breaking of the aggregate plan into finer levels of detail
24) Which of the following statements about aggregate planning is TRUE?
A) An advantage of the counterseasonal product and service mixing option is that it matches seasonal
fluctuations without hiring/training costs.
B) In aggregate planning, back orders are a means of manipulating supply while part-time workers are a
way of manipulating product or service demand.
C) A pure chase strategy allows lower inventories when compared to a pure level scheduling.
D) A disadvantage of subcontracting is that it may require skills or equipment outside the firm’s areas of
expertise.
E) The option of varying workforce size by hiring or layoffs is used where the size of the labor pool is
small.
25) Which choice best describes level scheduling?
A) Daily production is variable from period to period.
B) Subcontracting, hiring, and layoffs manipulate supply.
C) Price points are calculated to match demand to capacity.
D) Inventory goes up or down to buffer the difference between demand and production.
E) Overtime is used to handle seasonal demand fluctuations.
26) Which of the following statements regarding aggregate planning is TRUE?
A) In a pure level strategy, production rates or work force levels are adjusted to match demand
requirements over the planning horizon.
B) A pure level strategy allows lower inventories when compared to pure chase and hybrid strategies.
C) Mixed strategies in aggregate planning may utilize inventory, work force, and production rate changes
over the planning horizon.
D) Because service firms have no inventory, the chase strategy does not apply.
E) A disadvantage of the option of changing inventory levels is that it forces abrupt production changes.
27) In level scheduling, what is kept uniform from month to month?
A) product mix
B) inventory levels
C) production/workforce levels
D) demand levels
E) sub-contracting levels
28) Which of the following is NOT consistent with level scheduling?
A) varying the use of subcontracting
B) finding alternative work for employees during low-demand periods
C) using built-up inventory to meet demand requirements
D) varying production levels and/or work force to meet demand requirements
E) All of the above are inconsistent with the pure level strategy.
29) Which of the following is consistent with a chase strategy?
A) vary production levels to meet demand requirements
B) vary work force to meet demand requirements
C) vary production levels and work force to meet demand requirements
D) little or no use of inventory to meet demand requirements
E) All of the above are consistent with a chase strategy.
30) Which of the following is NOT an advantage of level scheduling?
A) stable employment
B) lower absenteeism
C) matching production exactly with sales
D) lower turnover
E) more employee commitment
31) A firm uses the chase strategy of aggregate planning. It produced 1000 units in the last period.
Demand in the next period is estimated at 800, and demand over the next six periods (its aggregate
planning horizon) is estimated to average 900 units. Which of the following tactics would be most
representative of following a chase strategy?
A) add 100 units to inventory in the next period
B) add 200 units to inventory in the next period
C) hire workers to match the 100-unit difference
D) lay off workers to match the 200–unit difference
E) implement a lower price point to increase demand
32) Which of the following actions is consistent with the use of level scheduling?
A) use inventory to meet demand requirements
B) use overtime to meet higher-than-average demand requirements
C) vary production levels to meet demand requirements
D) vary work force to meet demand requirements
E) none of the above
33) ________ is a capacity option that works especially well in the service sector where labor needs are
relatively unskilled.
34) Developing a mix of ________ products is a widely used demand smoothing technique.
35) The ________ strategy sets production equal to forecasted demand.
36) ________ maintains a constant output rate, or work force level, over the planning horizon.
37) Identify (a) the demand options for aggregate planning; and (b) the capacity (supply) options for
aggregate planning.
38) Explain the fundamental difference between the “capacity options” and the “demand options” of
aggregate planning strategies.
39) Compare the chase strategy versus level scheduling.
40) The textbook illustrates demand management in the form of price cuts or discounts. Can demand
manipulation for aggregate planning involve price increases? Explain; provide an example.
41) If a service firm were to attempt level scheduling for aggregate planning, should its level of output be
at average demand, peak demand, or minimum demand?
42) Most people would argue that a service firm must follow chase or mixed strategies. On the other
hand, most state agencies, which are clearly service-oriented, are not at all able to “chase” demand.
Discuss how they manipulate demand to allow the level strategy to be used.
43) What is a disadvantage common to the following two strategies: (1) varying inventory levels and (2)
back ordering during periods of high demand?
Section 5 Methods for Aggregate Planning
1) Graphical techniques are easy to understand and use, but are not well–suited for generating optimal
strategies.
2) The transportation method of linear programming is an optimizing approach to aggregate planning.
3) A firm practices a chase strategy. Production last quarter was 1000. Demand over the next four
quarters is estimated to be 900, 700, 1000, and 1000. Hiring cost is $20 per unit, and layoff cost is $5 per
unit. Over the next year, what will be the sum of hiring and layoff costs?
A) $500
B) $2,500
C) $7,500
D) $7,000
E) $12,500
4) “An optimal plan for minimizing the cost of allocating capacity to meet demand over several planning
periods” best describes which of the following?
A) the linear decision rule
B) simulation
C) the management coefficients model
D) the transportation method
E) graphical methods
5) A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its
intermediate period), it estimates the sum of demands to be 105,000 units. The firm has 250 production
days per year. In January, which has 22 production days, demand is estimated to be 11,000 units. A graph
of demand versus level production will show that:
A) the January requirement is below level production of 420 units.
B) level production is approximately 1000 units per day.
C) level production of 420 units per day is below the January requirement.
D) level production is approximately 420 units per month.
E) the firm must hire workers between December and January.
6) Which of the following aggregate planning methods does not work if hiring and layoffs are possible?
A) the linear decision rule
B) simulation
C) the management coefficients model
D) the transportation method
E) graphical methods
7) A manager is applying the transportation model of linear programming to solve an aggregate planning
problem. Demand in period 1 is 100 units, and in period 2, demand is 150 units. The manager has 125
hours of regular employment available for $10/hour each period. In addition, 50 hours of overtime are
available for $15/hour each period. If holding costs are $2 per unit each period, how many hours of
regular employment should be used in period 1? (Assume demand must be met in both periods 1 and 2
for the lowest possible cost and that production is 1 unit per hour.)
A) 100
B) 125
C) 150
D) 50
E) none of the above
8) ________ for developing aggregate plans work with a few variables at a time and are easy to
understand and use.
9) Among the mathematical approaches to aggregate planning, ________ is good at working with
inventories, holding costs, overtime, and subcontracting, but not with hiring and layoffs.
10) Normally, the transportation model is used to solve problems involving several physical sources of
product and several physical uses of the product, as in factories and warehouses. How is it possible to use
the transportation model where the “routes” are from one time period to another? Describe how this
provides aggregate planners with a usable mathematical model.
11) Describe the advantages and limitations of the graphical method of aggregate planning.
12) List, in order, the five steps of the graphical method of aggregate planning. Is it possible that these
steps can be properly followed and the solution properly implemented without using a graph? Explain.
13) Describe the advantages and limitations of the transportation method for aggregate planning.
14) Fairview Industries is preparing its aggregate plan for the second half of the year. The table below
contains monthly demand estimates and working days per month. Complete the table by computing total
demand, demand per day (for each month), and the average requirement (in units per day) over the six–
month planning horizon. Prepare a graph of forecast demand and level production, by months, for the
planning period. Label your graph carefully.
Month
Expected
Demand
Production
Days
Demand per
Day
July
18,000
20
August
21,000
23
September
17,500
21
October
12,500
21
November
12,000
20
December
13,500
21
TOTAL
Month
Expected
Production
Demand per
July
18,000
20
900.00
August
21,000
23
913.04
September
17,500
21
833.33
October
12,500
21
595.24
November
12,000
20
600.00
December
13,500
21
642.86
94,500