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-Why is it important to match supply and demand?

If a manager believes that supply and

demand will not be equal, what actions could the manager take to increase the probability
of achieving a match?
Answer:
It is important to match supply and demand because having excess supply or excess demand is
wasteful and costly; having too little means lost opportunity and possible customer
dissatisfaction.
If supply is less than demand then manager can schedule more production by increasing Hours,
Hiring temporary workers, Ordering more raw material, Increasing the inventory, Renting a new
raw material storage, Starting with over time allowances, Extra shift hours. Etc.
If demand is less then manager can cut hours, layoff people, reduce shift hours, give a
production break to the employees, and manage the inventory so that nothing gets wasted.
-List the key ways that organizations compete.
Answer:
1. The key to successfully competing is to determine what customers want and then
directing efforts toward meeting (or even exceeding) customer expectations.
2. Two basic issues must be addressed. First: What do the customers want? (Which items on
the preceding list of the ways business organizations compete are important to
customers?) Second: What is the best way to satisfy those wants?

3. The Operations must work with marketing to obtain information on the relative
importance of the various items to each major customer or target market. This can help
understanding competitive issues can help managers develop successful strategies.

-Compute the multifactor productivity measure for each of the weeks


shown for production of chocolate bars. What do the productivity figures
suggest? Assume 40-hour weeks and an hourly wage of $12. Overhead is
1.5 times weekly labor cost. Material cost is $6 per pound?
Answer:
Week 1
Output=30,000
Workers=6
Material=450
Multifactor= Usable output
---------------------------Labor+ Material+ Overhead cost
=

30,000

-------------------------------------------------------------------------------------------------------------------------(6 workers*40 hours*$12/hour) + (450 pounds * $6/ pound) + (6 workers*40


hours*$12/hour*1.50)
= 30,000
___________
9900
=3.03 Unit of output per dollar of input
Week 2
Output=33,600
Workers=7
Material=470
Multifactor= Usable output

---------------------------Labor+ Material+ Overhead cost


=

33,600

-------------------------------------------------------------------------------------------------------------------------(7 workers*40 hours*$12/hour) + (470 pounds * $6/ pound) + (7 workers*40


hours*$12/hour*1.50)
= 33,600
___________
11220
=3 Units of output per dollar input.
Week 3
Output=32,200
Workers=7
Material=460
Multifactor= Usable output
---------------------------Labor+ Material+ Overhead cost
=

32,200

-------------------------------------------------------------------------------------------------------------------------(7 workers*40 hours*$12/hour) + (460 pounds * $6/ pound) + (7 workers*40


hours*$12/hour*1.50)
= 32,200
___________
11160
=2.90 Units of output per dollar input.
Week 4
Output=35,400
Workers=8
Material=480
Multifactor= Usable output
---------------------------Labor+ Material+ Overhead cost
=

35,400

-------------------------------------------------------------------------------------------------------------------------(8 workers*40 hours*$12/hour) + (480 pounds * $6/ pound) + (8 workers*40


hours*$12/hour*1.50)
= 35,400
___________
12480
=2.84 Units of output per dollar input.

What is aggregate planning? What is its purpose?


Answer:
Aggregate Planning: is intermediate-range capacity planning. It is particularly useful for
organizations that experience seasonal or other fluctuations in demand or capacity.

Purpose of aggregate Planning:


The goal of aggregate planning is to achieve a production plan that will effectively utilize the
organizations resources to match expected demand. Planners must make decisions on output
rates, employment levels and changes, inventory levels and changes, back orders, and
subcontracting in or out.

Briefly discuss the advantages and disadvantages of each of these planning Strategies.

a. Maintain a level rate of output and let inventories absorb fluctuations in demand.

b. Vary the size of the workforce to correspond to predicted changes in demand


requirements.

c. Maintain a constant workforce size, but vary hours worked to correspond to


predicted demand requirements

Answer:

a. Maintain a level rate of output and let inventories absorb fluctuations in demand.
Disadvantages:

The money get tied up in inventories.


Problems in maintain large storage facilities.
Other cost related to the inventories rise.

Advantages:

Minimum cost in training and recruitment.


Minimum overtime and idle time cost.
Fewer morale problem which are associated with laying off an employee.
Stable use of equipment and facilities.

b. Vary the size of the workforce to correspond to predicted changes in demand


requirements
Disadvantages:

Its costly
Risk that there will not be sufficient pool of workers with the required skill.
Requires significant amount of paper work.
Intrusion of Labor union.

Advantages:

Stable use of equipment.


Minimum overtime and idle time cost.

Inventories can be kept low.


Lower cost in maintaining the inventories.

C. Maintain a constant workforce size, but vary hours worked to correspond to predicted
demand requirements
Disadvantages:

Its costly
People tend to get use to such a kind of working hours
Over use of the equipment and facilities

Advantages:

Minimum overtime and idle time cost.


Inventories can be kept low.
Lower cost in maintaining the inventories.

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