1. An Emergency Room plans to add capacity in two phases. After the first phase the average capacity utilization is expected to drop from 95% to 85%, and after the second phase from 85% to 75%. Which of the following statements is true?
a) First phase will result in a greater reduction in waiting time by patients
b) Second phase will result in a greater reduction in waiting time by patients
c) Each phase reduces the waiting time by the same amount
Why?
Because initial change creates a much bigger impact than subsequent changes.
2. Can you reduce the amount of safety stock and reduce the chance of being out of stock simultaneously?
a) No
b) Yes, by ordering a larger quantity each time you order
c) Yes, by ordering more frequently
Why?
Ordering larger quantity would increase safety stock. Ordering more frequently would reduce safety stock and increase the chance of stock outs.
3. Maximizing capacity utilization is more justified when:
a) There are many steps in the production process
b) Demand variability is low
c) Process variability is low
d) b and c
Why? Demand variability has to be low: swings in demand could leave you with a lot of extra product. Also, is there are problems with the process there could be quality control issues, so both b and c are correct.
4. Maximizing capacity utilization increases profitability when:
a) Demand is very predictable
b) Process is very reliable (less breakdowns)
c) Both a and b
d) Neither a nor b
Why?
Reliable process means you can plan in advance to best maximize profits. Predictable demand is important because is demand is predictable and your capacity is equal to demand profits will be high.
5. From a supply chain management perspective, what is the most logical reason why Zara would buy the shares of its joint venture partners in Japan? [Note: the question is which is the most logical reason among these three and why; it is not which is a possible reason.]
a) The distance to Japan makes it difficult to maintain the desired rhythm for ordering and shipping
b) It wants to improve the quality of information it collects about the Japanese customers
c) It is the only way to control the inventory in these stores
Why?
Fast inventory turn is what makes Zara uniquely profitable. According to the case, "distance is not measured in kilometers, but in time."
6. In Benihana, assuming demand is greater than the restaurant's capacity, which of the following is true:
a) Batching reduces the need for more space in the bar
b) Batching reduces demand variability
c) Batching reduces capacity utilization in dining hall
d) Batching reduces the effect of demand variability on process variability
Why?
If you batch people and fill each table completely, there will be fewer people waiting in the bar.
7. In which of the following situations, historical sales provide a more accurate estimate of demand?
a) When demand volatility (variability) is low
b) When "Service Level" is high (i.e., there are fewer stockouts)
c) When the production process is highly reliable (very few breakdowns)
Why?
If demand is similar year-to-year then historical sales can help estimate future demand. For example, if you sold 10 widgets a year for the past 5 years, chances are you will sell 10 next year.
8. A company sells 300 umbrellas per year--on average 10 umbrellas per working day, but historically never more than 20 umbrellas on any day. The company has a policy of keeping a safety stock equal to one day sales on hand. What is the optimal safety stock?
a) 10 umbrellas
b) 15 umbrellas
c) 20 umbrellas
d) None of the above
Why?
Mathematically, the average is the correct long rum amount to have.
Assume a plant makes four different models of DeskJet printers. Up to now, it has been producing each model only once every week (for example, Model A on Mondays, Model B on Tuesdays and part of Wednesdays, Model C on Wednesdays and Thursdays, and Model D on Fridays). There is a proposal to move from weekly to daily schedule and produce some of each model every day. Total weekly production output would be the same. Assume changeover times and costs (from one model to another) are insignificant.