Companies that must determine well in advance of the selling season ho

Question

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Passage # 94, Date: 17-May-2020
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Companies that must determine well in advance of the selling season how many units of a new product to manufacture often underproduce products that sell well and have overstocks of others. The increased incidence in recent years of mismatches between production and demand seems ironic, since point-of-sale scanners have improved data on consumers’ buying patterns and since flexible manufacturing has enabled companies to 24 produce, cost-effectively, small quantities of goods. This type of manufacturing has greatly increased the number of new products introduced annually in the United States. However, frequent introductions of new products have two problematic side effects. For one, they reduce the average lifetime of products; more of them are neither at the beginning of their life (when prediction is difficult) or at the end of their life (when keeping inventory is expensive because the products will soon become obsolete). For another, as new products proliferate, demand is divided among a growing number of stock-keeping units (SKU’s). Even though manufacturers and retailers can forecast aggregate demand with some certainty, forecasting accurately how that demand will be distributed among the many SKU’s they sell is difficult. For example, a company may be able to estimate accurately the aggregate number of shoes it will sell, but it may be uncertain about which specific types of shoes will sell more than other types.   1 
 C 
1. Which of the following most accurately describes the function of the last sentence in the passage (Last 2 lines)?

(A) To cite a situation in which the aggregate demand is more important than the distribution of demand among SKU’s
(B) To refute an assertion about the side effects of flexible manufacturing
(C) To illustrate an assertion about companies’ ability to forecast demand
(D) To provide an example of ways in which companies address the difficulties of forecasting demand
(E) To note an exception to the author’s assertion about distributing demand among SKU’s

2 
 E 
2. The passage suggests which of the following about divided demand among a growing number of SKU’s?

(A) It has increased the average lifetime of products.
(B) It has resulted from retailer’s attempts to predict demand more accurately and avoid both understocks and overstocks.
(C) It has decreased the use of flexible manufacturing by companies.
(D) It has not increased the expense of keeping inventory of certain products.
(E) It has not prevented companies from predicting aggregate demand with some certainty.

3 
 D 
3. According to the passage, which of the following has led to growth in the number of new products introduced in the United States each year?

(A) Reduced average lifetime of products
(B) Increased ability to forecast aggregate demand
(C) More cost-effective ways of keeping inventory for products
(D) Cost-effective production of small quantities of goods
(E) Increased ability to divide demand among a number of SKU’s and to forecast how that demand will be distributed among those SKU’

Harley1980 · Accepted Answer

Hello  anewbeginning

Here is the text from passage:
Sentence before (we need it because text from question begins from text "for example" so these sentences are linked):
" Even though manufacturers and retailers can forecast aggregate demand with some certainty, forecasting accurately how that demand will be distributed among the many SKU’s they sell is difficult.  "
and sentence from question:
" For example, a company may be able to estimate accurately the aggregate number of shoes it will sell, but it may be uncertain about which specific types of shoes will sell more than other types. "

answer D: " To provide an example of ways in which companies address the difficulties of forecasting demand "
According to the passage companies just have these difficulties and we don't know exactly do they do something about it or no. (logically they do, but passage doesn't mention it)

answer E: " To note an exception to the author’s assertion about distributing demand among SKU’s "
This is counteract to what we see in passage:

Even though manufacturers and retailers can forecast aggregate demand with some certainty,  forecasting accurately how that demand will be distributed among the many SKU’s they sell is difficult . For example, a company may be able to  estimate accurately the aggregate number of shoes it will sell , but it may be  uncertain about which specific types of shoes will sell more  than other types.

So first sentence says that companies can make  total estimate , but can't make estimate of  certain type  
and further example says that companie can estimate  total quantity of shoes  but can't estimate sells of  specific model of shoes .

We don't have any exception in this example and it completely support assertion from first sentence.

answer C: " To illustrate an assertion about companies’ ability to forecast demand " 
First sentence assert that companies can make total estimate, but can't make estimate of certain type and second sentence make specific example of this assertion.

Lucy Phuong · Answer

Hi,

I saw you asked this question about 20 days ago and there has been no response so far, so I just wanna share some thoughts. Hope this helps.

Q3:  The passage suggests which of the following about divided demand among a growing number of SKU’s?

--> Look for key words "divided demand among a growing number of SKU’s" at the end of the passage, and read related sentences (especially the last 3 sentences). Now we understand that "divided demand among a growing number of SKU’s" is the second side effect of "frequent introductions of new products"

A. It has increased the average lifetime of products.  
--> This option brings information in another part (the first side effect) then put it in a relation with the second side effect.  Wrong!  There is no such a relationship between these two effects. Also, the option also distorts the first side effect, because, as mentioned in the passage, the average lifetime of products "decreased", rather than "increased".

B. It has resulted from retailer’s attempts to predict demand more accurately and avoid both understocks and overstocks.  
--> If there is a causal relationship here, it is "divided demand among a growing number of SKU’s" that led to "retailer’s attempts to predict demand more accurately and avoid.....", rather than came from (resulted from) retailer's attempts. Therefore, (B) is  wrong .

C. It has decreased the use of flexible manufacturing by companies.  
--> It is true that "divided demand among a growing number of SKU’s" is a negative impact of "flexible manufacturing". However, it is nowhere is the passage we can conclude that this negative effect has decreased the use of this type of manufacturing. Another  wrong  choice.

D. It has not increased the expense of keeping inventory of certain products.  
--> Similar to (A), choice (D) just twisted the information by bringing information about the first side effect (expense of keeping inventory of certain products) to put in a relationship with the second side effect.  Wrong!

E. It has not prevented companies from predicting aggregate demand with some certainty. 
--> Yes, this is exactly what is mentioned at the end of the passage - " Even though manufacturers and retailers can forecast aggregate demand with some certainty , forecasting accurately how that demand will be distributed among the many SKU’s they sell is difficult."

Q4:  According to the passage, which of the following has led to growth in the number of new products introduced in the United States each year?

Well if you read the passage carefully enough in initial reading, you may quickly spot rightly the sentence mentioning the cause of of "growth in the number of new products introduced in the United States each year". It is quite at the middle of the passage  ".....and since  flexible manufacturing has enabled companies to 24 produce, cost-effectively, small quantities of goods. This type of manufacturing  has greatly increased the number of new products introduced annually in the United States." . There you are, the correct answer is pretty clear now. But we still need to eliminate incorrect answer choices.

A. Reduced average lifetime of products  
-->  Wrong!  This a problematic effect, rather than the cause, of frequent introduction of new products.

B. Increased ability to forecast aggregate demand  
-->  Wrong.  It is mentioned in the passage that "manufacturers and retailers can forecast aggregate demand with some certainty", but this inherent ability has nothing to do with frequency of new products' introduction.

C. More cost-effective ways of keeping inventory for products  
--> Wrong. Similar to choice (A), "keeping inventory for products" is just mentioned as an impact, not the cause, of frequent introduction of new products.

D. Cost-effective production of small quantities of goods 
--> Exactly!

E. Increased ability to divide demand among a number of SKU’s and to forecast how that demand will be distributed among those SKU’.   
-->  Wrong.  First of all, "the ability to forecast how that demand will be distributed among those SKU’" is an inherent difficulty, and is totally not related to frequent introduction of new products.

keats · Answer

Dear Moderators/Experts,

Can you please shed some light on Q1 options C,D and E. I selected C, but I was unsure about it.

Please if you can explain why not choice D and E -

D. To provide an example of ways in which companies address the difficulties of forecasting demand
E. To note an exception to the author’s assertion about distributing demand among SKU’s

Thanks

NandishSS · Answer

HI  GMATNinja ,  GMATNinjaTwo ,

Can somebody explain these two que

The passage suggests which of the following about divided demand among a growing number of SKU’s?
A. It has increased the average lifetime of products.
B. It has resulted from retailer’s attempts to predict demand more accurately and avoid both understocks and overstocks.
C. It has decreased the use of flexible manufacturing by companies.
D. It has not increased the expense of keeping inventory of certain products.
E. It has not prevented companies from predicting aggregate demand with some certainty.

I've marked B

According to the passage, which of the following has led to growth in the number of new products introduced in the United States each year?
A. Reduced average lifetime of products
B. Increased ability to forecast aggregate demand
C. More cost-effective ways of keeping inventory for products
D. Cost-effective production of small quantities of goods
E. Increased ability to divide demand among a number of SKU’s and to forecast how that demand will be distributed among those SKU’

Why not A

daviddaviddavid · Answer

Im sorry but I don't get it

E. It has not prevented companies from predicting aggregate demand with some certainty. 
--> Yes, this is exactly what is mentioned at the end of the passage - " Even though manufacturers and retailers can forecast aggregate demand with some certainty , forecasting accurately how that demand will be distributed among the many SKU’s they sell is difficult."

It is mentioned that they can forecast aggregate demand with some certainty, but not that they actually do ???

Am I missing something ?

Lucy Phuong · Answer

Hi,

Here we have 2 tasks: 
(1) predicting aggregate demand
(2) predicting divided demand

Do you see any relation between  the ability to predict aggregate demand(1)  and  the ability to predict divided demand(2)  ? NO! And the situation mentioned in the passage is that 
- Company can do (1)
- Company cannot do (2)

=> Even though companies cannot do (2), they can do (1). In other words, the inability to do (2) cannot prevent the companies to do (1). That's what option (E) states.

Does that make sense?

Masterscorp · Answer

About question 1, vaiv123

The last sentence looks as follows

Quote:

For example, a company may be able to estimate accurately the aggregate number of shoes it will sell, but it may be uncertain about which specific types of shoes will sell more than other types.

Now let's take a look at D and C:

Quote:

D. To provide an example of ways in which companies address the difficulties of forecasting demand

Does the last sentence explain how companies fix the difficulty of forecasting demand? No, it just states that accurate forecasts for the aggregate number of sales are possible but it doesn't explain how these forecasts are generated. Hence, we can rule out answer D.

Quote:

C. To illustrate an assertion about companies’ ability to forecast demand

This answers mentions an assertion, but which one is it talking about? In the previous sentence we find " Even though manufacturers and retailers can forecast aggregate demand with some certainty, forecasting accurately how that demand will be distributed among the many SKU’s they sell is difficult". This quote is the assertion that example in the last sentence illustrates. The example shows that aggregate demand can be forecasted but the specific demand for certain SKUs can be predicted.

Hope that helps

KeyurJoshi · Answer

1) Which of the following most accurately describes the function of the last sentence in the passage?

A. To cite a situation in which the aggregate demand is more important than the distribution of demand among SKU’s - Out of scope. No comparisons in last sentence. 
B. To refute an assertion about the side effects of flexible manufacturing - Incorrect. Example supporting one of the two problems.
C. To illustrate an assertion about companies’ ability to forecast demand -  Correct.  Abilities: Can forecast aggregate demand::Can forecast number of shoes | Cannot forecast distribution of demand among SKU::cannot forecast sale of types of shoes
D. To provide an example of ways in which companies address the difficulties of forecasting demand - Incorrect. Example of the problem is given and not the example of ways to address that problem.
E. To note an exception to the author’s assertion about distributing demand among SKU’s - Out of Scope. No exceptions cited.

2) The passage suggests which of the following about divided demand among a growing number of SKU’s?

A. It has increased the average lifetime of products. - Incorrect. frequent intro of new products led to this.
B. It has resulted from retailer’s attempts to predict demand more accurately and avoid both understocks and overstocks. - Incorrect. Intro to new products led to demand distribution
C. It has decreased the use of flexible manufacturing by companies. - Out of scope.
D. It has not increased the expense of keeping inventory of certain products. - Out of scope.
E. It has not prevented companies from predicting aggregate demand with some certainty. -  Correct.  Inference: manufacturers and retailers can forecast aggregate demand with some certainty

3) According to the passage, which of the following has led to growth in the number of new products introduced in the United States each year?

Inference: since flexible manufacturing has enabled companies to produce, cost-effectively, small quantities of goods. This type of manufacturing has greatly increased the number of new products introduced annually in the US.

A. Reduced average lifetime of products - Growth of new products led to this and not the other way around.
B. Increased ability to forecast aggregate demand - Incorrect. May have helped but we dont know. 
C. More cost-effective ways of keeping inventory for products - Incorrect. we dont know that
D. Cost-effective production of small quantities of goods -  Correct Parallel. 
E. Increased ability to divide demand among a number of SKU’s and to forecast how that demand will be distributed among those SKU’s - Nonsensical. Increase in new products -> Demand distribution among SKUs and not the other way.

datemike · Answer

Hi @LucyPhuong, thanks for the explanation. I can see why Option E is correct. However, I still have a doubt as to why Option B is incorrect. As per my understanding:
 "Companies that must determine well in advance of the selling season how many units of a new product to manufacture often underproduce products that sell well and have overstocks of others."  The passage talks about this issue of underproducing and overproducing and then highlights that this can be solved by producing small quantities of goods. It then goes on to say,  "However, frequent introductions of new products have two problematic side effects" . - one of which is the divided demand

Hence the relationship that I inferred was:  mismatch in underproducing and over producing -> small quantity production -> 2 side effects . Therefore the divided demand has resulted from retailers'  attempts  to predict demand more accurately and avoid both understocks and overstocks,  the attempt being small quantity production . This is why I marked Option B.

Request your inputs!

siddhantvarma · Answer

A little late to the party, but reviewing this quesiton for 15 minutes helped me understand where we're going wrong with this line of reasoning. 
You’re trying to build a  causal chain :

Retailer’s attempts to predict demand accurately & avoid stock issues → frequent production of new products → divided demand. 
The problem is: the  first link  in that chain (retailers’ prediction attempts → more new products) is  never stated in the passage .

This is all the passage actually states:
 
- Flexible manufacturing  has made it cost-effective to produce small batches → This has  greatly increased the number of new products introduced annually .
 - Frequent new product introductions  → shorter product lifetimes & demand divided among more SKUs.

That’s the only causal chain we’re given.
 There’s  no mention  that the increase in new products is due to  retailers trying to predict demand more accurately  or avoid over/understock.

For B to be correct, we’d need a sentence explicitly linking  retailers’ prediction attempts  to  the increase in SKUs .

Companies that must determine well in advance of the selling season ho

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Companies that must determine well in advance of the selling season ho

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