Master Planning of Resources

Practice Exam Review

Programme Review
Sean Pomphrett CFPIM IPICS Instructor

Advancing Productivity, Innovation, and Competitive Success

Objectives
To review the questions in the practice exam. To identify and explain the correct answers. To answer questions from the participants.

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1. All of the following are elements of Master Planning except: a. Demand Management b. Production Planning c. Capacity Requirements Planning d. Master Scheduling Master Planning consists of Demand Management, Sales and Operations Planning, which generates the Production Plan, and Master Scheduling. Capacity Requirements Planning is used to validate the capacity availability following MRP. The answer is C, CRP.
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2. The January forecast, using exponential smoothing, was 283 units. Sales in January were 295 units. Sales in February, March and April were 300, 287, and 295 units respectively. Using an alpha-factor of .2, what is the May forecast? a. I dont have enough information to calculate it. b. 289 c. 286 d. 291
Actual Forecast Calculation 295 283 0.2 x 295 + 0.8 300 286 0.2 x 300 + 0.8 287 289 0.2 x 287 + 0.8 295 289 0.2 x 295 + 0.8
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Jan Feb Mar Apr

x 283 x 286 x 289 x 289

New Forecast 286 289 289 291

Advancing Productivity, Innovation, and Competitive Success

3. Given the following information, calculate the piece item fill rate and the revenue fill rate of this order for immediate shipment: Order no 1: Item A: 6 @ $50 each Item B: 5 @ $75 each Item C: 8 @ $100 each Item D: 1 @ $500 On Hand Stock: Item A, 8; Item B, 4; Item C, 7; Item D, 2. a. 50%, 76% b. 90%, 76% c. 50%, 91% d. 90%, 91%

Explanation: Total order value = $1975; Items Ordered = 20 Value of Shipments: $1800 (all except the 1 @100 and 1 @75) Items Shipped: 18 Piece Item Ship Rate = 18/20 = 90% Revenue Fill Rate = 1800/1975 = 91%
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4. Which of the following are established to define what restrictions to changes in the MPS are established ? a. Time fences b. Planning periods c. Planning horizon d. Bottleneck management

Explanation: The time fences bound the frozen, slushy and liquid periods. Each of these period will have different rules determining what can and cannot be done in terms of changing the MPS.

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5.

What is the difference between a final assembly schedule and a master production schedule? a. The final assembly schedule addresses a longer term planning horizon than the master schedule and looks at customer orders rather than forecast demand. b. The final assembly schedule addresses a shorter term planning horizon than the master schedule and looks at customer orders rather than forecast demand. c. The final assembly schedule addresses a longer term planning horizon than the master schedule and looks at forecast demand rather than customer orders d. The final assembly schedule addresses a shorter term planning horizon than the master schedule and looks at forecast demand rather than customer orders.

Explanation: MPS deals with forecast and orders; FAS orders only. As orders will typically not carry as far into the future as forecast, the FAS will have a shorter horizon.

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6. The production forecast a. Is primarily used with master production scheduled items b. Is used in two-level master scheduling to help determine the MPS quantities. c. Represents the group forecast in two level master scheduling d. Is based on production lead times.

Explanation: The Production Forecast is the exploded option requirements based on the ATP of end products in an Assemble-to-Order environment. This becomes the forecast requirements for these options, which is used, along with the orders, to maintain the MPS for those options.
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7. All of the following may be a reason for forecast error except: a. Functional management non-participation in the development and execution of the forecast system. b. A competitors promotional activity c. Our own promotional activity d. The complexity of the forecasting system.
Explanation: Our own promotional activity must be taken into account when creating the forecast, so should not cause any more error than usual. Options a and d may cause error through the use of the wring forecasting system or the misuse of the forecasting system, and a competitors promotional may have an effect on our demand that we had not predicted. The best answer, therefore, is C.

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8. Pull systems of planning and control a. Allow each distribution centre to manage its own inventory b. Centralise inventory management c. Rely on replenishment orders from the stocking locations nearest to the production facility d. Are decentralised at the first level of distribution and centralised at every other point. Explanation: Pull systems are decentralised; the customer decides on its own inventory policies levels and replenishment practices.

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9.

In which of the following manufacturing environments would there typically be a greater proliferation of item numbers at the raw material rather than the finished product stage? a. Make to stock b. Make to order c. Assemble to order d. Engineer to order.

Finished Products

Manufacturing Process

Raw Materials

MTS

MTO or ETO

ATO Or Mass Customisation

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10. In the example below, using a batch quantity of 75, the master production schedule will create what projected balances in weeks 3 and 4?

Open Forecast PAB MPS

a. b. c. d. 75,65 0,65 5,15 5,10

80

1 60 20 0

2 80 15 75

3 90 0 75

4 85 65 150

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11. In the example above, what changes would be necessary to the MPS if the opening inventory were 30 instead of 80? a. b. c. d. No changes would be required An order for an additional 75 in week 1 only A reduction of 75 in the order for week 4 only An order for an additional 75 in week 1 and a reduction of 75 in the order for week 4.

Open Forecast PAB MPS 30

1 60 45 75

2 80 40 75

3 90 25 75

4 85 15 75

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12. Which of the following statements is most accurate? a. The MPS deals with product families b. The production plan is less detailed than the MPS c. The production plan can be used to provide order promising information. d. The MPS and the production plan have the same planning horizon.

Explanation: The MPS deals with specific end product rather than product families; The MPS typically deals with time periods of a week rather than months or quarters as the production plan does; Order promising is by specific product; The determinant of planning horizon is the time taken to change major resources in production planning; in the MPS it is the longest cululative material leadtime.
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13. MPS quantities in the frozen period can best be described as: a. Firm planned orders b. Planned orders c. Scheduled receipts d. Equal to shipment quantities
Explanation: A firm planned order is a planned order for which the planner has taken responsibility. The master scheduler has control over every planned MPS order, therefore they are FIRM planned orders. They will only become scheduled receipts when they are converted into works orders and released into production.

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14. All of the following are used as Planning BOMs except: a. Modular BOMs b. SuperBOMs c. Kit BOMs. d. Phantom BOMs Explanation: The phantom BOM is a bill of material used to organise into a set the material used in the manufacture of an assembly that is immediately used in the manufacture of a higher level assembly. All of the others are planning BOMs.

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15. Which of the following manufacturing strategies uses build-ups and depletion of inventory to balance supply and demand? I. Level Strategy II. Chase Strategy III. Hybrid Strategy

a. b. c. d.

I only II only I & III only I, II and III

Explanation: The chase strategy matches production to demand at all times therefore no finished goods inventory buildup is never created. A level strategy uses inventory to create the balance; the hybrid uses inventory and periodic capacity changes to create the balance.
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16. Which of the following elements of demand would be considered when constructing a Master Production Schedule I. Market forecasts II. Customer orders III. Interplant orders IV. Engineering requirements a. I and II only b. II, III and IV only c. I & III only d. I, II, III and IV

Explanation: ALL potential elements of independent demand need to be taken into account when constructing the MPS. Each of the above is such an element.

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17. Which of the following purposes does a tracking signal serve in a forecast? a. It identifies the size of the forecast error b. It identifies a bias in the forecast. c. It identifies the rate at which the forecast is being consumed by orders. d. It helps identify whether the most appropriate forecasting system is being used.

Explanation: The standard deviation or MAD sizes the error; ATP identifies the rate at which the forecast is being consumed. A tracking signal will help identify if the appropriate forecasting system is being used, but not whether the MOST appropriate system is being used. Tracking signals do, however, detect bias (i.e. whether or not the forecast is consistently over or understated.)

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18.

Which of the following are inputs to a realistic master production schedule? I. Customer orders II. The existing MPS III. Bottleneck capacity constraints IV. The production plan. a. b. c. d. I and IV only I, II and IV only II and III only I, II, III and IV

Explanation: Customer orders are part of the demand; the MPS is updated on a regular basis; RCCP verifies capacity availability of bottleneck resources, and the production is disaggregated by the MPS.

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19. Final assembly scheduling is conducted when a. A customer order is received b. The MPS is being finalised c. The daily production detail is being finalised. d. Demand exceeds inventory to meet it.

Explanation: The final assembly schedule allocates and assigns capacity and material to customer assembly orders as they are received.

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20. What one of the following statements is untrue in relation to MAD and Standard Deviation a. b. c. d. The standard deviation is 1.25 times the MAD The MAD identifies the size and direction of the forecast error, the standard deviation identifies just the size. Either MAD or standard deviation can be used to calculate the amount of safety stock needed to achieve the desired level of customer service. MAD is easier to calculate than standard deviation.

Explanation: Both MAD and Std. Dev. Measure just the size of the error; neither measures the direction as both use the absolute vale of the error, ie they treat a deviation of +10 and 10 as equal.

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21. The primary purpose of time fences is to: a. Determine how far the forecast needs to look into the future. b. Determine the degree of change that can be allowed in the MPS c. Create stable supplier schedules d. Simplify the job of the Master Scheduler.

Explanation: The time fences bound the frozen, slushy and liquid periods. Each of these period will have different rules determining what can and cannot be done in terms of changing the MPS.
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Demand Time Fence

Period Forecast Orders PAB 140 ATP MPS 1 2 3 4 5

100 110
30 30 0

175 150
30 0 150

180 100
0 50 150

120 60
30 90 150

200 40
130 260 300

22. The MPS orders to balance the this scenario will be: a. 0,150,300,150,300 b. 150,150,150,150,150 c. 0,150,150,150,300 d. 150,0,300,150,300

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Demand Time Fence

Period Forecast Orders PAB 140 ATP MPS 1 2 3 4 5

100 110
30 30 0

175 150
30 0 150

180 100
0 50 150

120 60
30 90 150

200 40
130 260 300

23. Which of the following statements is not correct in relation to the above information? a. The ATP quantity in period 2 will be 0. b. The maximum new customer order that can be accepted for delivery by week 3 is 170 c. An order for 80 units can be promised for delivery in week 3. d. Inventory is projected to reduce by 10 over the 5-week period.

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24. The MPS is a tool that can be used to inform communication between which two groups: a. Senior management and operational staff b. Sales and manufacturing c. Finance and manufacturing d. Manufacturing and distribution.

Explanation: The link between senior management and operations staff is the production plan The MPS gives everybody notice of what will be built/made. The ATP enables sales to give achievable delivery promises. The ATP informs sales of the additional order-taking potential. Replenishment orders and delivery commits, or DRP, are the links between manufacturing and distribution. Budgets and performance against budget are the link between finance and manufacturing.
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1 Order s ATP 70 25

2 30

3 45 30

4 40

5 10

MPS

125

125

25. Based on the above information, which is the most appropriate response to give to a request for a new customer order of 50 in week 3? a. Schedule an additional MPS order for 125 in week 3, and accept the order. b. Schedule an additional MPS order for 125 in week 4, and accept the order for delivery in week 4 c. Schedule an additional order MPS order for 125 in week 4, and accept the order for delivery in week 3. d. Accept the order for delivery in week 3 without any changes to the MPS.

Explanation: Unsold quantities from the above schedule are 25 available in week 1 and 30 in week 3; the new order can take 50 of these and still leave 5 available in week 1.
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26. The forecast for next year is for sales of 6000 units. The Q2 seasonal index is 1.4. Based on this information, what is the projected sales for Q2 of next year? a. 1900 b. 1100 c. 900 d. 2100

Explanation: Annual sales = 6000 Average quarter sales = 1600/4 = 1500 Q2 forecast = av quarter x seasonal index = 1500 x 1.4 = 2100

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27. A make-to-order company has maintained an 8-week customer leadtime for the past year. It now wishes to reduce this leadtime to 3 weeks over the next 20 weeks. By how much must its output levels change to achieve this reduction using a level production strategy? a. Increase output by 20% b. Reduce output by 20% c. Increase output by 25% d. Reduce output by 25%

Explanation: To reduce the queue we must INCREASE output. To reduce the queue by 5 weeks over the next 20 we must produce the equivalent of 25 weeks production over the next 20 weeks. The increase, therefore is to 25/20 of the current level of production, or increase the current level by 5/20 ie 25%

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28. Which of the following would be the most appropriate forecast technique to use during the early introduction phase of a product? a. Exponential smoothing b. Seasonal indices c. Historical analogy d. Pyramid forecasting

Explanation: Options a, b and d represent the use of quantitative techniques which rely on the presence of historical data. In the above scenario this will not be available, so those cannot be the correct option. Historical analogy sends us back to examine what happened at a similar stage of a similar product in the past a qualitative technique.

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29. When production consistently fails to achieve the Master Production Schedule, what is the most appropriate action to take. a. Identify the capacity constraints and revise the MPS b. Organise overtime to catch up on the backlog c. Reschedule customer delivery dates d. Shorten the frozen period in the MPS

Explanation: The MPS must be feasible as verified by RCCP. Therefore we must create a feasible MPS to resolve the problem fully. Each of the other actions are things we might do to overcome the difficulties created by the current situation but without a. the problem will merely continue.

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30.

In which of the following manufacturing scenarios is a two-level Master Scheduling process appropriate? I. Make to stock II. Make to order III. Assemble to order a. I only b. II only c. III only d. Both II and III

Explanation: In III, options will be made to stock via the MPS and customer orders will create the FAS. In II, raw material will be purchased to stock via the MPS and capacity assigned to customer orders via the FAS. In I, goods are made to stock and material is purchased based on the MPS.

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31. Which of the following statements is true related to exponential smoothing? a. It can be used at the introductory stage of a products life cycle. b. It does not work for products with seasonal demand. c. Exponential smoothing can never track a trend. d. It is a quick method of creating forecasts for stabledemand products. As a quantitative technique, exponential smoothing is inappropriate at the introductory stage of a product because it demands history to work. While it will lag a trend, it will detect one, and will work even where there is seasonal demand. The best answer is D.

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32. A distribution system currently has 8 warehouses, each holding 500 units of safety stock of the companys most popular product. The company intends to rationalise the distribution by closing six warehouses and consolidating its activities into the remaining 2. How much safety stock will now be required in each warehouse? a. 1000 b. 2000 c. 3000 d. 4000

The total safety stock will change by the ssquare root of the muliple of change in the number of warehouses. Reducing the warehouse from 8 to 2 means reducing by 4 times the number of warehouses. The total safety stock will the reduce by SQRT(4), which is 2. This means that the total safety stock, which is currently 4000 (500 x 8) will reduce by half to 2000, giving 1000 in each of the 2 remaining warehouses.

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33. All of the following are elements of Vendor Managed Inventory except? a. Suppler has access to the customers inventory data b. The vendor is responsible for maintaining the customers inventory levels c. Replenishment is triggered at a certain sales level d. The supplier owns the inventory

All of the above are key elements of VMI except the statement that the supplier owns the inventory. The ownership of the inventory is determined and agreed at the contract negotiation stage.

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34. Which of the following statements about non-cumulative Available to Promise is true? a. Material is allocated to orders as soon as it is available. b. It enables reliable delivery promises to be made. c. ATP = Projected inventory - orders d. ATP = MPS Orders.
Using ATP data, whether cumulative or non-cumulative, the material that is effectively allocated to customer orders will be that material that will come available either on or most recently before the promised delivery date to the customer. In calculating non-cumulative ATP, the formulae are: Period 1: Inventory + MPS Orders Customer orders up to next MPS quantity. All other periods: MPS order Customer orders up to next MPS quantity.

Statements C and D therefore alre also false, leaving B as the best (and only true) answer.
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35 The Production Plan inhibits the MPS in which of the following ways: I. It defines the aggregate level of output. II. It sets out the level of resources available. a. b. c. d. I only. II only Both I and II Neither I nor II

The production plan setos out the aggregate production by product family. This must be disaggregated and achieved in the MPS. It also, through being validated by resource planning, determines the level of resources available to production. The answer, therefore is C.

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36 A company needs to increase its inventory of finished goods from 2 months to 3 months. Its forecasted sales are remaining steady at 2000 per month over the next 5 months. The production plan, therefore, should call for what quantity to be produced per month over the next 5 months? a. 1600 b. 2000 c. 2400 d. 2800

Total production = total sales + change in inventory. Total sales = 5 x 2000, = 10000 Change in inventory = Add 1 month = increase by 2000 Total production = 12,000 Production per month = 2400

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37. To calculate the scientific level of safety stock what factors must be taken into account? a. Standard deviation of the forecast and the target customer service level. b. The value of the safety stock and the production lead-time. c. The amount of storage space available and the cost of inventory. d. The quality of the forecast and the cost of inventory.

While options b, c and d will be taken into account in defining the feasibility of holding the requisite amount of safety stock, the level is calculated by applying the safety factor (which is determined by the level of customer service required) to the standard deviation quantity. The best answer therefore is A.

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38. Before the demand time fence, MPS quantities: a. Can never be changed b. Are based only on actual sales c. Both a and b are true d. Neither a nor b are true

Statement A is false, because nothing happens never. However, changes in the frozen should be made only when absolutely necessary, and then only when properly authorised according to the rules. Statement B is also false as MPS quantities are based upon onhand inventory and lot size rules as well as customer orders. Statement C, therefore is also false, and staement D is true.

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39. Which of the following statements concerning RCCP is best? a. It is concerned only with bottleneck workcentres. b. If done properly the plant will never be overloaded c. It identifies new bottlenecks d. It is a critical part of master scheduling
RCCP deals with known bottleneck resources not just work centres, so A is false. As previously stated nothing happens never and new bottlenecks can be created by a change in the mix of products B is also false. C is false, as new bottlenecks will not be identified until CRP is carried out. D is true as it is critical to the success of the MPS that it is verified for validity and the means of doing that is through RCCP.

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40. Which of the following is the least likely result of an overloaded master schedule? a. Customer service will deteriorate. b. Excessive unplanned overtime will be performed. c. Productivity will increase as people react to the heavy load. d. Product quality will be unaffected

An overstated MPS will result in missed schedules giving rise to missed customer delivery promises; it will cause the need for unplanned overtime as production tries to match output to the excessive load, and will probably cause quality to deteriorate as the pressure to get work done takes priority over getting it done properly. What will NOT happen is that productivity will increase in fact the opposite is true. Productivity will reduce as production reacts to the constant reprioritisation of work that will follow the missed schedules.
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Thank you all for your attendance and attention over the past few weeks.
I will be available for individual questions and/or assistance at seanpom@eircom.net right up to the exam. Good luck to you all.

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