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Production and Operations Management: Why Busier Isn't Faster

How factories decide what to make and when: forecasting, aggregate and master planning, MRP, EOQ, capacity, scheduling rules, lean production and the theory of constraints.

Production and Operations Management · 50 questions

Try 3 questions

1. Why are forecasts for a whole product family usually more accurate than forecasts for each item?

  1. Families always have fewer customers
  2. Families are forecast with better software
  3. Item errors partly cancel out when combined
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Answer: Item errors partly cancel out when combined

Highs for one item tend to offset lows for another, so the aggregate varies relatively less than its parts.

2. A moving-average forecast is applied to demand that rises steadily. What will it tend to do?

  1. Overshoot and overestimate demand
  2. Lag behind and underestimate demand
  3. Track demand with no error at all
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Answer: Lag behind and underestimate demand

Averaging past values centers the forecast on older, lower demand, so it trails a trend.

3. In exponential smoothing, a higher smoothing constant (alpha) makes the forecast do what?

  1. React faster but jump around more
  2. Ignore the latest demand entirely
  3. Smoother but slower to react
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Answer: React faster but jump around more

Alpha is the weight on the newest observation, so a high alpha chases recent changes, including random noise.

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