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File: ch14, Chapter 14: Materials Planning

Multiple Choice

1. What does ERP stand for?


a) educational resources planning
b) enterprise resource planning
c) enterprise reliability production
d) end routing procedure
e) easy resource planning

Ans: b
Section Ref: Enterprise Resource Planning
Level: easy

2. ERP is software designed for _____ and ____ business processes.


a) calculating, budgeting
b) deleting, changing
c) organizing, managing
d) organizing, budgeting
e) selecting, managing

Ans: c
Section Ref: Enterprise Resource Planning
Level: easy

3. What is an information system designed to integrate internal and external members of the
supply chain?
a) material requirements planning
b) master production schedule
c) capacity requirements planning
d) aggregate planning
e) enterprise resource planning

Ans: e
Section Ref: Enterprise Resource Planning
Level: easy

4. Owens Corning reported savings of ______________ by using ERP.


a) $6 million
b) $16 million
c) $65 million
d) $600 million
e) $660 million

Ans: c
Section Ref: Enterprise Resource Planning
Level: hard

5. Which of the following is not one of the four basic categories of ERP modules?
a) finance and accounting
b) information systems
c) sales and marketing
d) production and materials management
e) human resources

Ans: b
Section Ref: Enterprise Resource Planning
Level: moderate

6. Which ERP module includes investment management?


a) finance and accounting
b) information systems
c) sales and marketing
d) production and materials management
e) human resources

Ans: a
Section Ref: Enterprise Resource Planning
Level: moderate

7. Which ERP module handles billing?


a) finance and accounting
b) information systems
c) sales and marketing
d) production and materials management
e) human resources

Ans: c
Section Ref: Enterprise Resource Planning
Level: hard

8. Which ERP module includes work-flow analysis?


a) finance and accounting
b) information systems
c) sales and marketing
d) production and materials management
e) human resources

Ans: e
Section Ref: Enterprise Resource Planning
Level: hard

9. What proportion of U.S. companies with greater than $1 billion in annual revenues has
implemented ERP?
a) 10%
b) 20%
c) 40%
d) 75%
e) 95%

Ans: c
Section Ref: Enterprise Resource Planning
Level: hard

10. The ERP system provides a single interface:


a) to operations only.
b) to operations and inventory control only.
c) to external members of the supply chain as well.
d) to the company management structure only.
e) to customers only.

Ans: c
Section Ref: The Evolution of ERP
Level: moderate

11. Second generation ERP systems addressed the first generation deficiency of:
a) inadequate statistics
b) interdepartmental communications
c) integrated modules
d) continuous planning capabilities
e) forecasting capabilities

Ans: d
Section Ref: The Evolution of ERP
Level: moderate

12. ERP systems provide _____ and _____ benefits.


a) tangible, HR
b) intangible, marketing
c) marketing, operation
d) tangible, intangible
e) CEO, CFO

Ans: d
Section Ref: The Benefits of ERP
Level: moderate

13. Second-generation ERP systems are referred to as ________________________ software.


a) scheduling
b) MRP
c) inventory management
d) MPS
e) supply chain management

Ans: e
Section Ref: Enterprise Resource Planning
Level: moderate

14. _______________ MRP is an MRP system that includes production planning, master
production scheduling, and capacity requirements planning.
a) Fully-integrated
b) Closed-loop
c) Open-loop
d) Wide-range
e) Enterprise

Ans: b
Section Ref: The Cost of ERP Systems
Level: easy

15. The most critical factors for successful EPR implementation are ______ and ______ ______
______
a) leadership, top management commitment
b) leadership, technological transfer management
c) management, technological transfer management
d) funding, top management commitment
e) leadership, detailed technical specifications

Ans: a
Section Ref: The Cost of ERP Systems
Level: moderate
16. What information system enables companies to have the right material in the right amounts
available at the right time?
a) manufacturing resources planning
b) multifunctional requirements planning
c) material requirements planning
d) material relationships planning
e) manufacturing requirements planning

Ans: c
Section Ref: The Cost of ERP Systems
Level: easy

17. Companies use to check that enough work is scheduled for operations and
that the amount of work scheduled is feasible.
a) capacity management
b) closed-loop requirements planning
c) cut requirements planning
d) capacity resources planning
e) capacity requirements planning

Ans: e
Section Ref: The Cost of ERP Systems
Level: easy

18. Independent demand is the demand for ________________________________.


a) finished products
b) subassemblies
c) parts
d) raw materials
e) components

Ans: a
Section Ref: Material Planning Systems
Level: easy

19. In the mid-1970s, MRPII, was developed. One of its major components is:
a) leadership
b) inventory management
c) operations execution
d) strategic management
e) marketing

Ans: c
Section Ref: Material Planning Systems
Level: moderate
20. Which of the following most closely describes dependent demand?
a) demand generated by suppliers
b) demand that is seasonal
c) demand estimates using regression analysis
d) demand derived from finished products
e) demand for repair parts

Ans: d
Section Ref: Material Planning Systems
Level: moderate

21. A computer-based information system designed to manage dependent demand inventory is


_____________.
a) manufacturing resources planning
b) multifunctional requirements planning
c) material relationships planning
d) material requirements planning
e) manufacturing requirements planning

Ans: d
Section Ref: Material Planning Systems
Level: moderate

22. The file lists the materials needed to build a product.


a) master production schedule
b) bill of material
c) inventory records
d) material needs
e) build structure

Ans: b
Section Ref: Material Planning Systems
Level: moderate

23. CRP systems are used to check that the amount of work:
a) meets the MRP directive.
b) meets the ERP directive.
c) will make a profit.
d) is feasible.
e) meets OSHA requirements.

Ans: d
Section Ref: An Overview of MRP
Level: easy
24. The details the companys planned products, quantity, and the
schedule used by marketing when promising deliveries.
a) master production schedule
b) bill of material
c) inventory records
d) material product sales
e) promised deliveries

Ans: a
Section Ref: Types of Demand
Level: moderate

25. The is (are) checked for the materials on hand and those that need
to be procured.
a) master production schedule
b) bill of material
c) inventory records
d) material inventories
e) promised deliveries

Ans: c
Section Ref: Objectives of MRP
Level: moderate

26. MRP develops a that shows future demand, supply and inventories by
time period.
a) DSI report
b) snapshot forecast
c) requirements plan
d) material movements schedule
e) time-phased schedule

Ans: e
Section Ref: Types of Demand
Level: moderate

27. In MRP, the starting points for each part and material needed to accomplish the master
production schedule are the ________________________.
a) net requirements
b) gross requirements
c) planned releases
d) scheduled receipts
e) planned receipts
Ans: b
Section Ref: Types of Demand
Level: moderate

28. Which of the following is not true concerning replenishment orders?


a) They are generated when there is not enough inventory.
b) MRP specifies when to place the order.
c) The order may be for material from a supplier.
d) They are orders for the final product.
e) The order may be for material from the manufacturing floor.

Ans: d
Section Ref: Types of Demand
Level: moderate

29. Which of the following is an objective of MRP?


a) Keep priorities updated and valid.
b) Keep track of material movements on the shop floor.
c) Provide information for expediting orders.
d) Allocate scarce parts to products.
e) Provide information for activity based costing.

Ans: a
Section Ref: Types of Demand
Level: moderate

30. The authorized MPS is a statement of


_____________________________________________________.
a) manufacturing orders that have been authorized for release to the shop floor
b) which workers are authorized to work on which machines
c) what the company expects to build and when it expects to build it
d) authorized payments to vendors
e) where different end products are authorized to be manufactured

Ans: c
Section Ref: Types of Demand
Level: moderate

31. The quantity of the replenishment order is based on the


__________________________________.
a) capacity available
b) size of the item
c) number of workers available
d) inventory space available
e) lot sizing rule used

Ans: e
Section Ref: Types of Demand
Level: moderate

32. Information that may be contained in the inventory records file includes all except which of
the following?
a) part numbers
b) run times for manufactured parts
c) part names
d) lead times
e) safety stock requirements

Ans: b
Section Ref: Objectives of MRP
Level: moderate

33. The time interval necessary to either manufacture or purchase an item is its
______________________.
a) time fence
b) lead time
c) safety time
d) time bucket
e) receipt time

Ans: b
Section Ref: Objectives of MRP
Level: moderate

34. Information in the inventory records file that can change with inventory transactions includes
the ________.
a) part number
b) lot size rule
c) projected inventory level
d) lead time
e) safety stock requirement

Ans: c
Section Ref: Objectives of MRP
Level: hard
35. An error in replenishment ordering can result from a(n)
____________________________________.
a) inaccuracy in the inventory records file
b) breakdown of equipment
c) expediting of an order
d) circumstance of working excessive overtime
e) error in accounts receivables

Ans: a
Section Ref: Objectives of MRP
Level: hard

36. What is a technique for improving inventory record accuracy?


a) cycle counting
b) drum, buffer, rope
c) Kanban
d) tracking signal
e) statistical process control

Ans: a
Section Ref: Objectives of MRP
Level: moderate

37. Gross requirements for finished products are taken from


_____________________________________.
a) the inventory records file
b) the order entry file
c) the authorized MPS
d) the bill of materials file
e) forecasted sales

Ans: c
Section Ref: MRP Inputs
Level: moderate

38. When there is insufficient inventory to satisfy the forecast for a particular period a(n)____
order must be placed.
a)BOM
b) restock
c) inventory request
d) MPS
e) MRP

Ans: d
Section Ref: MRP Inputs
Level: moderate
39. Scheduled receipts are _________________________________________.
a) planned orders
b) planned orders offset by lead time
c) gross requirements offset by lead time
d) gross requirements minus inventory
e) replenishment orders that have been placed but not yet received

Ans: e
Section Ref: MRP Inputs
Level: moderate

40. For every scheduled receipt in an MRP table, there is also in the organization a(n)
__________________.
a) shop floor order
b) order that has been placed but not yet been received
c) planned order
d) period order
e) dispatch list

Ans: b
Section Ref: MRP Inputs
Level: hard

41. For any period the beginning inventory, plus any replenishment orders due, less the gross
requirement equals
a) planned orders
b) projected available quantity
c) scheduled receipts
d) lead time
e) safety stock

Ans: b
Section Ref: MRP Inputs
Level: moderate

42. The beginning inventory for any time period is equal to


_____________________________________.
a) safety stock plus gross requirements from the previous period
b) scheduled receipts plus projected available quantity
c) planned orders plus scheduled orders
d) projected available quantity from at the end of the previous period
e) gross requirements less scheduled orders

Ans: d
Section Ref: MRP Inputs
Level: moderate

43. Which of the following is not true for planned orders?


a) They are necessary only for finished products.
b) They result when there is not enough inventory to cover the gross requirements.
c) The quantity is calculated using the lot-sizing rule.
d) The lead time is required to determine when the order should be placed.
e) The inventory records file is updated for the order.

Ans: a
Section Ref: MRP Inputs
Level: moderate

44. The MRP file that contains data on specific materials used to make final products and their
correct quantities is the ___________________________________________.
a) authorized master production schedule
b) bill of materials file
c) inventory records file
d) part status file
e) routing file

Ans: b
Section Ref: MRP Inputs
Level: moderate

45. When there is insufficient inventory to cover the gross requirements for a period
a) an MRP is placed
b) an ERP is placed
c) a planned order is placed
d) a scheduled order is placed
e) a rush order occurs

Ans: c
Section Ref; MRP Inputs
Level: moderate

46. The MRP input listing the intermediate assemblies, subassemblies, component parts, raw
materials, and the quantities of each needed to produce one final product is the
_____________________________________.
a) authorized master production schedule
b) bill of materials file
c) inventory records file
d) part status file
e) assembly time chart

Ans: b
Section Ref: MRP Inputs
Level: moderate

47. Which of the following is not true concerning indented bills of materials?
a) Subsequent levels are indented further to the right.
b) Children are indented toward the right.
c) The highest level parents are closest to the left margin.
d) Quantity required is shown for each part number.
e) Lead times determine how far children are indented.

Ans: e
Section Ref: MRP Inputs
Level: hard

48. A visual depiction of the subassemblies and components that are needed to produce a finished
product is called a(n) ____________________________________.
a) assembly time chart
b) product structure tree
c) peg
d) product chart
e) blueprint

Ans: b
Section Ref: MRP Inputs
Level: moderate

49. An item that has no parents is a(n)


_________________________________________________.
a) subassembly
b) end item
c) child item
d) intermediate assemble
e) component

Ans: b
Section Ref: MRP Inputs
Level: hard

50. The cumulative lead time is


__________________________________________________________.
a) the sum of the lead times for all the components
b) the sum of the lead time and the safety time
c) the number of time buckets used in the MRP
d) the longest route in terms of time from the low level items to the end item in the product
structure tree
e) lead time less the safety time

Ans: d
Section Ref: MRP Inputs
Level: hard

51. The lead time can be less than the cumulative lead time when
____________________________________.
a) the company has inventory on hand
b) the order has already been shipped
c) the supply chain is well tuned
d) there is no safety time
e) the order is expedited

Ans: a
Section Ref: MRP Inputs
Level: moderate

52. The gross requirements of a given component part are determined from
__________________________.
a) scheduled receipts plus projected available
b) gross requirements of the parent
c) planned orders of the parent
d) projected available of the end item
e) planned orders of the end item

Ans: c
Section Ref: The MRP Explosion Process
Level: moderate

53. Which of the following is not true for action notices that are produced by MRP systems?
a) An action notice is produced when a planned order needs to be released.
b) An action notice is produced when due dates of orders need to be adjusted.
c) An action notice is produced when the lead time is not sufficient for a planned order.
d) An action notice is produced when inventory is moved to the manufacturing floor.
e) They indicate actions that need to be taken by inventory planners.

Ans: d
Section Ref: The MRP Explosion Process
Level: moderate

54. The current time period is referred to as ______________________________.


a) time zero
b) the point of departure
c) the start time
d) the action bucket
e) this year

Ans: d
Section Ref: The MRP Explosion Process
Level: moderate

55. A positive quantity in the current periods planned order row means that
_________________________.
a) lead time is too long
b) the projected available is negative
c) gross requirements are too large
d) the planned order is due to be completed in the current period
e) an order must be released

Ans: e
Section Ref: The MRP Explosion Process
Level: moderate

56. Production and inventory planners release orders to


______________________________________.
a) the expediter
b) either an external supplier or to the shop floor
c) the logistics manager
d) either the shop floor or to the warehouse
e) marketing

Ans: b
Section Ref: The MRP Explosion Process
Level: moderate

57. An order released to a supplier authorizes


_________________________________________________.
a) the shipment of the material so that it arrives as needed
b) movement of the material from the warehouse to the supplier
c) the sending of information concerning production to the supplier
d) accounting to set up an accounts receivable entry
e) the logistics manager to start investigating shipment options

Ans: a
Section Ref: The MRP Explosion Process
Level: moderate
58. An action notice is generated
__________________________________________________________.
a) for planned orders in any period
b) only for orders that are to be released to the shop floor
c) only for movements to and from the warehouse
d) only when marketing needs to be notified
e) when a planned order needs to be released

Ans: e
Section Ref: The MRP Explosion Process
Level: hard

59. If an order is not scheduled to arrive in time, the planner tries to


_______________________________.
a) find a replacement order
b) cancel the order
c) split the order in two
d) expedite the order
e) talk marketing into changing the due date

Ans: d
Section Ref: The MRP Explosion Process
Level: moderate

60. Which of the following is not a lot size rule?


a) lot for lot
b) fixed order quantity
c) overall factors
d) least total costs
e) parts period balancing

Ans: c
Section Ref: The MRP Explosion Process
Level: moderate

61. Different lot size rules determine the quantity of the order and
___________________________.
a) the quality
b) change the frequency of replenishment orders
c) how projected available is calculated
d) the lead time
e) the backorder cost

Ans: b
Section Ref: The MRP Explosion Process
Level: moderate

62. If setup costs are essentially zero (negligible when compared to carrying costs), which
approach should be used for lot sizing?
a) lot for lot
b) fixed order quantity
c) period order quantity with POQ = 6 periods
d) period order quantity with POQ = 2 periods
e) period order quantity with POQ = 4 periods

Ans: a
Section Ref: Action Notices
Level: hard

63. Selection of the lot size rule to be used should be based on minimizing
__________________________.
a) the order size
b) late shipments
c) total processing time
d) quality problems
e) the sum of ordering and carrying costs

Ans: e
Section Ref: Action Notices
Level: easy

64. Capacity requirements planning uses data from


__________________________________________.
a) MRP
b) rough-cut capacity planning
c) aggregate planning
d) MPS
e) the bill of labor file

Ans: a
Section Ref: Action Notices
Level: moderate

65. For capacity requirements planning, loads for critical work centers are calculated based on
___________.
a) open external supplier orders and planned external supplier orders
b) gross requirements for the end product
c) open shop orders and planned shop orders
d) safety stock
e) the sum of ordering and carrying costs

Ans: c
Section Ref :The Role of Capacity Requirements Planning (CRP)
Level: moderate

66. Which of the following is not a direct input to capacity requirements planning?
a) planned shop orders
b) open shop orders
c) setup time and run time per unit for shop orders
d) current inventory levels
e) quantity for shop orders

Ans: d
Section Ref :The Role of Capacity Requirements Planning (CRP)
Level: moderate

67. With capacity requirements planning, the calculated workload for a work center is compared
with _____.
a) available capacity
b) calculated workloads for other work centers
c) the cost of expanding the work center
d) standard capacity
e) design capacity

Ans: a
Section Ref :The Role of Capacity Requirements Planning (CRP)
Level: moderate

68. If the available capacity at a work center is not adequate, the company can
______________________.
a) decrease run times per piece
b) authorize overtime
c) expedite
d) decrease order quantities
e) hold up payment

Ans: b
Section Ref :The Role of Capacity Requirements Planning (CRP)
Level: moderate

69. Capacity requirements planning enables the company to evaluate ____________________.


a) employee morale
b) its suppliers
c) its manufacturing costs
d) quality
e) how well it is using its critical work centers

Ans: e
Section Ref: The Role of Capacity Requirements Planning (CRP)
Level: moderate

70. Dell practices _____________________________.


a) focused customization
b) make to stock production
c) mass merchandising
d) mass customization
e) frozen assembly schedules

Ans: d
Section Ref: Enterprise Resource Planning
Level: hard

71. Which of the following is not a major supplier of ERP systems?


a) SAP AG
b) PeopleSoft
c) Oracle
d) Baan
e) IBM

Ans: e
Section Ref: The Benefits of ERP
Level: hard

72. Setup time is changed:


a) once each day regardless of product changes.
b) each time the operator begins the machine.
c) each time the machine is prepared to produce the desired item quantity.
d) for each shift that works on the desired item quantity manufacturing.
e) on rare occasions if it takes significant time.

Ans: c
Section Ref: The Role of Capacity Requirements Planning (CRP)
Level: easy
73. According to the text, most manufacturing operations, production or inventory control
planners are responsible for working with MRP. Planners are typically responsible for all but
which of the following:
a) end item inventory items
b) subassemblies inventory items
c) component inventory items
d) raw material pricing

Ans: d
Section Ref: Resource Planning Across the Organization
Level: moderate

74. Which of the following does not share a common ERP database?
a) internal to the organization
b) suppliers
c) customers
d) the supply chain
e) CEO strategic plan

Ans: e
Section Ref: The Supply Chain Link
Level: easy

True/False

1. Material requirements planning is an information system designed to integrate internal and


external members of the supply chain.

Ans: False
Section Ref: Enterprise Resource Planning
Level: moderate

2. The primary objective of ERP is to integrate all departments and functions, internal and
external, onto a single computer system to serve the enterprises needs.

Ans: True
Section Ref: Enterprise Resource Planning
Level: moderate

3. ERP systems are more commonly found in small companies than in large ones.

Ans: False
Section Ref: Enterprise Resource Planning
Level: hard

4. ERP modules are fully integrated.

Ans: True
Section Ref: Enterprise Resource Planning
Level: moderate

5. Supply chain intelligence enables strategic decision-making along the supply chain.

Ans: True
Section Ref: The Evolution of ERP
Level: moderate

6. ERP and e-commerce systems should not interface with each other.

Ans: False
Section Ref: The Evolution of ERP
Level: hard

7. MRP develops a time-phased schedule that shows future demand, supply and inventories by
time period.

Ans: True
Section Ref: Types of Demand
Level: moderate

8. The company forecasts dependent demand based on independent demand input.


Ans: False
Section Ref: Types of Demand
Level: moderate

9. The authorized MPS is a statement of what the company expects to build and when it expects
to build it.

Ans: True
Section Ref: Types of Demand
Level: moderate
10. An error in replenishment ordering can result from an inaccuracy in the inventory records file.

Ans: True
Section Ref: Objectives of MRP
Level: hard

11. Gross requirements for finished products are taken from the order entry file.

Ans: False
Section Ref: MRP Inputs
Level: moderate

12. Scheduled receipts are replenishment orders that have been placed but not yet received.

Ans: True
Section Ref: MRP Inputs
Level: moderate

13. For any period the beginning inventory, plus any replenishment order due, less the gross
requirement equals planned orders.

Ans: False
Section Ref: MRP Inputs
Level: moderate

14. A product structure tree is a visual depiction of the subassemblies and components that are
needed to produce a finished product.

Ans: True
Section Ref: MRP Inputs
Level: easy

15. An end item has no parents.

Ans: True
Section Ref: MRP Inputs
Level: hard
16. The lead time can be less than the cumulative lead time when the company has inventory on
hand.

Ans: True
Section Ref: MRP Inputs
Level: moderate

17. The gross requirements of a given component part are determined from planned orders of the
parent.

Ans: True
Section Ref: The MRP Explosion Process
Level: moderate

18. Production and inventory planners release orders to the expediter.

Ans: False
Section Ref: The MRP Explosion Process
Level: moderate

19. The explosion process calculates the demand for the parent of the children.

Ans: False
Section Ref: The Role of Capacity Requirements Planning (CRP)
Level: moderate

20. An order released to the shop floor authorizes withdrawal of the needed materials and the
start of production.

Ans: True
Section Ref: The MRP Explosion Process
Level: hard

21. If an order is not scheduled to arrive in time, the planner tries to cancel the order.

Ans: False
Section Ref: The MRP Explosion Process
Level: easy

22. Under lot for lot, order sizes are essentially determined directly from gross requirements.
Ans: True
Section Ref: Action Notices
Level: moderate

23. Capacity requirements planning enables the company to evaluate how well it is using its
critical work centers.

Ans: True
Section Ref: The Role of Capacity Requirements Planning (CRP)
Level: moderate

24. Companies use a single lot-sizing technique to standardize processes.

Ans: False
Section Ref: The Role of Capacity Requirements Planning (CRP)
Level: moderate

Essay

1. Explain how Dell Computer has become able to implement mass customization.

Ans: Dell begins assembly of a customers order almost immediately after receiving the order. To
do this, Dell must carefully manage its component inventories, knowing availability of
needed components to complete the assembly. Information regarding the order is sent to
members of its supply chain to assure on-time delivery of the finished computer.
Section Ref: Enterprise Resource Planning
Level: hard

2. List the major users of ERP systems.

Ans: managers, employees, suppliers, and customers


Section Ref: Enterprise Resource Planning
Level: moderate

3. What is the primary objective of ERP?

Ans: Integrate all departments and functions, internal and external, onto a single computer
system to serve the enterprises needs.
Section Ref: Enterprise Resource Planning
Level: hard

4. What are the objectives of second-generation ERP systems?

Ans:leverage existing systems to increase efficiency in handling transactions, improve decision-


making, and to support e-commerce
Section Ref: Enterprise Resource Planning
Level: hard

5. What are some technological motivations for implementing ERP systems?

Ans:replace disparate systems; improve quality and visibility of information; integrate business
processes and systems; replace older, obsolete systems; and acquire systems that can support
future business growth
Section Ref: The Evolution of ERP
Level: hard

6. What transactions can cause information in the inventory records file to change?

Ans: releasing new orders, receiving previously ordered material, withdrawing inventory,
canceling orders, correcting inventory record errors, and adjusting for rejected shipments
Section Ref: Objectives of MRP
Level: hard

7. What are the characteristics of indented bills of materials?

Ans: The highest-level item is closest to the left margin. Components going into that item are
indented to the right. Subsequent levels are indented further to the right. Quantity required
is shown for each part number.
Section Ref: MRP Inputs
Level: hard

8. Under what conditions are action notices generated?

Ans: if a planned order needs to be released in the current period, when due dates of orders need
to be adjusted, or when there is insufficient lead time for a planned replenishment order
Section Ref: The MRP Explosion Process
Level: hard

9. Name some lot size rules.


Ans: least unit cost, least total costs, parts period balancing, fixed order quantity, lot for lot, and
period order quantity
Section Ref: The MRP Explosion Process
Level: moderate

10. Discuss the difference between the production and inventory control planners release order to
external suppliers versus the shop floor.

Ans: Release orders to the suppliers authorizes the shipment of the materials so it arrives as
needed. Orders released to the shop authorize withdrawal of the needed materials and the start of
production.
Section Ref: Action Notices
Level: moderate

11. Describe how workload is computed for a work center for capacity requirements planning.

Ans: MRP data for planned shop orders and open shop orders are used. For each order, the run
time per unit is multiplied by the quantity and added to the setup time to calculate the total
time for the order. The total times are added together for each time period to calculate the
workload for the work center for each time period.
Section Ref: The Role of Capacity Requirements Planning (CRP)
Level: hard

12. Discuss how MRP reports are used by the production and inventory planners.

Ans: These reports are used to (1) generate purchasing requisitions and (2) develop schedules of
different activities to be done on the manufacturing floor.
Section Ref: Resource Planning Within OM: How It all Fits Together.

Problems

1. Given the following data:


Usage per Lead Time
Item Parent (weeks)
J - 3
K 3 2
L 1 1
M 2 2
N 4 3
O 2 2
P 1 1
Q 6 2

The end product J is made from components K, L, and M. K is made from N and O. O is made
from P and Q.
(a) What is the replenishment lead time for J, assuming there are no inventories?
(b) Calculate the gross requirements for each of the components if the company plans to build 10
of its J model. Assume that there are no beginning inventories.
(c) Calculate the gross requirements for each of the components if the company plans to build 10
of its J model if you have these beginning inventories: 60 N and 60 O.
(d) What is the replenishment lead time if the company plans to build 10 of its J model, assuming
the beginning inventories given in (c) above?

Ans: (a) 9 weeks; (b) 10 J, 30 K, 10 L, 20 M, 120 N, 60 O, 60 P, and 360 Q; (c) 10 J, 30 K, 10 L,


20 M, 60 N, 0 O, 0 P, and 0 Q; (d) 8 weeks
Section Ref: MRP Inputs
Level: moderate

2. Given the following data:


Usage per Lead Time
Item Parent (weeks)
J - 1
K 4 2
L 2 3
M 4 1
N 1 4
O 5 2
P 3 2
Q 8 1
R 2 3
S 4 2

The end product J is made from components K and L. K is made from M and N. L is made from
O and P. P is made from Q, R, and S.
(a) What is the replenishment lead time for J, assuming there are no inventories?
(b) Calculate the gross requirements for each of the components if the company plans to build 10
of its J model. Assume that there are no beginning inventories.
(c) Calculate the gross requirements for each of the components if the company plans to build 10
of its J model if you have these beginning inventories: 20 K, 10 L, and 30 P.
(d) What is the replenishment lead time if the company plans to build 10 of its J model, assuming
the beginning inventories given in (c) above?

Ans: (a) 9 weeks; (b) 10 J, 40 K, 20 L, 160 M, 40 N, 100 O, 60 P, 480 Q, 120 R, and 240 S; (c)
10 J, 20 K,
10 L, 80 M, 20 N, 50 O, 0 P, 0 Q, 0 R, and 0 S; (d) 7 weeks
Section Ref: MRP Inputs
Level: moderate

3. Given the following data:


Usage per Lead Time
Item Parent (weeks)
J - 1
K 4 3
L 2 2
M 4 3
N 1 1
O 2 2

The end product J is made from components K, and L. K is made from M, N, and O.
(a) What is the replenishment lead time for J, assuming there are no inventories?
(b) Calculate the gross requirements for each of the components if the company plans to build 10
of its J model. Assume that there are no beginning inventories.
(c) Calculate the gross requirements for each of the components if the company plans to build 10
of its J model if you have these beginning inventories: 20 K and 80 M.
(d) What is the replenishment lead time if the company plans to build 10 of its J model, assuming
the beginning inventories given in (c) above?

Ans: (a) 7 weeks; (b) 10 J, 40 K, 20 L, 160 M, 40 N, and 80 O; (c) 10 J, 20 K, 20 L, 0 M, 20 N,


and 40 O;
(d) 6 weeks
Section Ref: MRP Inputs
Level: moderate

4. Given the following data:

Usage per Lead Time Beginning Lot Size


Item Parent (weeks) Inventory Rule
J - 3 0 L4L
K 3 2 40 L4L
L 4 1 60 L4L

The end product J is made from components K and L. The authorized MPS calls for 10 J to be
completed in week 4 and 30 J to be completed in week 7.
(a) What are the gross requirements for K and L?
(b) What are the planned orders for K and L?

Ans: (a) for K - 30 in week 1 and 90 in week 4, for L - 40 in week 1 and 120 in week 4; (b) for K
- 80 in week 2, for L - 100 in week 3
Section Ref: MRP Inputs
Level: moderate

5. Given the following data:

Usage per Lead Time Beginning Lot Size


Item Parent (weeks) Inventory Rule
J - 1 0 L4L
K 3 1 40 FOQ = 200
L 4 3 40 L4L
M 2 1 400 L4L
N 1 1 200 L4L

The end product J is made from components K and L. Component K is made from M and N. The
authorized MPS calls for 10 J to be completed in week 2, 30 J to be completed in week 3, 40 J to
be completed in week 5, and 50 J to be completed in week 6. There is a scheduled receipt of 120
L in week 2.
(a) What are the gross requirements for K, L, M and N?
(b) What are the planned orders for K, L, M and N?

Ans: (a) for K - 30 in week 1, 90 in week 2, 120 in week 4, and 150 in week 5; for L - 40 in week
1, 120 in week 2, 160 in week 4, and 200 in week 5; for M - 400 in week 1 and 400 in week
4; for N - 200 in week 1 and 200 in week 4; (b) for K - 200 in week 1, and 200 in week 4;
for L - 160 in week 1 and 200 in week 2; for M - 400 in week 3; for N - 200 in week 3
Section Ref: MRP Inputs
Level: hard

6. Given the following data:

Usage per Lead Time Beginning Lot Size


Item Parent (weeks) Inventory Rule
J - 1 0 L4L
K 8 1 850 FOQ = 2,000
L 6 1 1,250 L4L

The end product J is made from components K and L. The authorized MPS calls for 200 J to be
completed in week 3, 300 J to be completed in week 5, and 300 J to be completed in week 6.
There is a scheduled receipt of 400 L in week 2.
(a) What are the gross requirements for K and L?
(b) What are the planned orders for K and L?

Ans: (a) for K - 1,600 in week 2, 2,400 in week 4, and 2,400 in week 5; for L - 1,200 in week 2,
1,800 in week 4, and 1,800 in week 5; (b) for K - 2,000 in week 1, 2,000 in week 3, and
2,000 in week 4; for L - 1,350 in week 3 and 1,800 in week 4
Section Ref: MRP Inputs
Level: moderate

Use the following data for questions 7 & 8


Lot Size Lead
Bill of Material Rule Time
Doo 2
r 2 FOQ = 10 weeks
4
hinges 4 FOQ = 40 weeks
screws
(h) 24 FOQ = 50 1 week
3
knobs 2 FOQ = 10 weeks
screws
(k) 4 FOQ = 25 1 week
Stain 1 FOQ = 25 1 week

Week 1 2 3 4 5 6 7 8 9
Door Gross
Requirements 6 10

Beginning Doo screw


Inventory r hinges (h) knobs screw (K) Stain
2 20 30 5 15 10

7. For the data provided determine the Inventory Record using a FOQ lot size rule for the hinge.

Ans:
Week 1 2 3 4 5 6 7 8 9
Door Gross
Requirements 0 0 0 0 0 6 0 0 10
Hinge Gross
Requirements 0 0 0 0 24 0 0 40 0
Hinge Projected
Available 20 20 20 20 60 36 36 76 36
Hinge Planned Orders 40 40
Doo screw screw
Beginning Inventory r hinges (h) knobs (K) Stain
2 20 30 5 15 10
Section Ref: The MRP Explosion Process
Level: moderate

8. For the data provided determine the Inventory Record using a FOW lot size rule for the screw
(H).

Ans:
Week 1 2 3 4 5 6 7 8
Door Gross Requirements 0 0 0 0 0 6 0 0
Screw (H) Gross
Requirements 0 0 0 0 144 0 0 240
Screw (H) Projected
Available 30 30
30 180 36 36 286 36
Screw (H) Planned Orders 150 250
screw
Beginning Inventory Door hinges (h) knobs screw (K) Stain
2 20 30 5 15 10
Section Ref: The MRP Explosion Process
Level: moderate

9. Given the following data:

Period 1 2 3 4 5 6 7 8
Gross Requirements 20 20 50 50 80 80 50 50

The beginning inventory is 0 and there are no scheduled receipts. The order cost is $50 and the
holding cost is $1 per part per period.
(a) What are the order costs, carrying costs, and totals cost over the 8 periods using the lot-for-lot
size rule?
(b) What are the order costs, carrying costs, and totals cost over the 8 periods using the fixed
order quantity rule with FOQ = 100?
(c) What are the order costs, carrying costs, and totals cost over the 8 periods using the period
order quantity rule with POQ = 2?

Ans: (a) order costs = $400, carrying costs = $0, and total costs = $400; (b) order costs = $200,
carrying costs = $340, and total costs = $540; (c) order costs = $200, carrying costs = $200,
and total costs = $400
Section Ref: Action Notices
Level: moderate

10. Given the following data:

Period 1 2 3 4 5 6 7 8 9
Gross Requirements 70 30 90 30 80 20 90 60 80

The beginning inventory is 0 and there are no scheduled receipts. The order cost is $90 and the
holding cost is $1 per part per period.
(a) What are the order costs, carrying costs, and totals cost over the 9 periods using the lot-for-lot
size rule?
(b) What are the order costs, carrying costs, and totals cost over the 9 periods using the fixed
order quantity rule with FOQ = 100?
(c) What are the order costs, carrying costs, and totals cost over the 9 periods using the period
order quantity rule with POQ = 3?

Ans: (a) order costs = $810, carrying costs = $0, and total costs = $810; (b) order costs = $540,
carrying costs = $370, and total costs = $910; (c) order costs = $270, carrying costs = $550,
and total costs = $820
Section Ref: Action Notices
Level: moderate

11. Given the following data:


Run Time
Per unit in
Item Setup Time Standard
Number Period Quantity (Hours) Hours
KE738 3 400 3.6 0.45
KR376 4 550 2.7 0.25
KM276 4 800 1.6 0.70
KW718 5 200 4.0 0.15
KJ395 5 350 3.9 0.60
KA729 3 100 5.6 0.20
KP237 4 700 1.0 0.55
KF823 5 300 7.2 0.15
KH489 3 600 6.6 0.80
KE812 3 300 3.9 0.35
(a) What are the workloads for periods 3, 4, and 5?
(b) There are 168 hours of operating time per machine each period. How many machines should
be operated for periods 3, 4, and 5?

Ans: (a) 804.7 hours for period 3, 1,087.8 hours for period 4, and 300.1 hours for period 5; (b) 5
machines for period 3, 7 machines for period 4, and 2 machines for period 5
Section Ref: The Role of Capacity Requirements Planning (CRP)
Level: moderate

12. Given the following data:

Run Time
Per unit in
Item Setup Time Standard
Number Period Quantity (Hours) Hours
KE738 3 600 7.6 0.25
KR376 4 350 3.7 0.55
KM276 4 700 7.6 0.70
KW718 3 400 5.0 0.25
KJ395 4 250 8.9 0.40
KA729 3 500 3.6 0.30
KP237 4 600 5.0 0.65
(a) What are the workloads for periods 3 and 4?
(b) There are 168 hours of operating time per machine each period. How many machines should
be operated for periods 3 and 4?

Ans: (a) 416.2 hours for period 3, and 1,197.7 hours for period 4; (b) 3 machines for period 3,
and 8 machines for period 4
Section Ref: The Role of Capacity Requirements Planning (CRP)
Level: moderate

Short Answer
1. Scheduling all the activities that must be done by a due date from that point of view is called
________________________ scheduling.

Ans: backward
Section Ref: Enterprise Resource Planning
Difficulty: easy

2. ________________________ uses a database that supports processes across functional areas.

Ans: Enterprise Resource Planning (ERP)


Section Ref: Enterprise Resource Planning
Difficulty: moderate

3. Computer programs that are designed to improve supply chain decision making are called
________________________ software.

Ans: Supply Chain Management (SCM)


Section Ref: The Evolution of ERP
Difficulty: moderate

4. Supply chain intelligence enables _____ _____ _____ along the supply chain.

Ans: strategic decision making


Section Ref: The Evolution of ERP
Difficulty: moderate

5. An __________ sets up and runs ERP systems.

Ans: Application service provider (ASP)


Section Ref: The Evolution of ERP
Difficulty: moderate

6. The most critical factors in successful ERP programs are ________________________ and
________________________ .

Ans: leadership, top management commitment


Section Ref: The Cost of ERP Systems
Difficulty: hard

7. A ________________________ is the primary output of an MRP system.


Ans: schedule of replenishment orders
Section Ref: Types of Demand
Difficulty: hard

8. MRP systems require ________________________ , ________________________ , and


________________________ as inputs.

Ans: bill of materials, authorized master production schedule, and inventory records
Section Ref: Types of Demand
Difficulty: hard

9. Items that are sold as complete or repair parts are called ________________________

Ans: end items


Section Ref: MRP Inputs
Difficulty: hard

10. ________________________ assumes that we make enough of everything to build the


required quantity, ignoring beginning inventory.

Ans: rough cut capacity planning


Section Ref: The Role of Capacity Requirements Planning (CRP)
Difficulty: hard

11. ________________________ uses planned order releases from the MRP, which considers
beginning inventory.

Ans: capacity requirements planning


Section Ref: The Role of Capacity Requirements Planning (CRP)
Difficulty: hard

12. ________________________ uses the planned orders generated by MRP to evaluate the
feasibility of long-term or blanket contracts and to determine delivery need.

Ans: purchasing
Section Ref: Resource Planning within OM: How It All Fits Together
Difficulty: hard

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