BUSML 3380 Topic 8

True/False: According to the square root law of cycle stocks, an increase in sales should result in an increase in inventory-to-sales ratios.

False

True/False: Holding lower-than-optimal levels of inventory results in lower total costs.

False

True/False: According to the square root law of cycle stocks, larger warehouses should have greater inventory turns (all else equal).

True

What is your economic order quantity if your annual demand is 100 units, the order placement cost is $25, and the holding cost per unit per year is $50? a. 10 units b. 50 units c. 100 units d. 200 units e. None of the above

a. 10 units

Which of the following information is needed to complete a DRP table? I. Store-level demand forecast II. Economic order quantities III. Current inventory levels IV. Lead time information a. All four types of information are needed b. Only items I, III and IV are needed c. Only items II, III and IV are needed d. None of the above

a. All four types of information are needed

The square root law of cycle stocks is rooted in the recognition of what? a. In the EOQ formula, demand (D) is under the square root b. Cycle stocks are equal to two times the EOQ c. The sum of holding costs and order placement cost should be minimized d. The EOQ will always be greater than zero

a. In the EOQ formula, demand (D) is under the square root

_________ is a measure of how often inventories are depleted and replenished over the course of a given time period (e.g., year). a. Inventory turnover b. Dwell time c. In-stock rate d. Fill rate

a. Inventory turnover

Compared to a larger warehouse, a smaller warehouse should have __________ inventory turns. (assume all else is equal.) a. Lower b. Identical c. Similar d. Higher

a. Lower

Which of the following occurs as the order placement cost (K) increases? (Assume that nothing else changes.) a. The EOQ increases b. Annual demand increases c. The holding cost per unit per year increases d. None of the above

a. The EOQ increases

If annual demand is 24,000 units, and the order quantity is 3,000 units, then which of the following is true? a. The annual number of order placements will be 8, and average inventory levels will be 1,500. b. The annual number of order placements will be 8, and average inventory levels will be 3,000. c. The annual number of order placements will be 12, and average inventory levels will be 12,000. d. The annual number of order placements will be 24, and average inventory levels will be 12,000.

a. The annual number of order placements will be 8, and average inventory levels will be 1,500.

If, in a given scenario, the EOQ is 100, then what will be the average amount of cycle stock? a. 0 b. 50 c. 100 d. 200

b. 50

The strategic profit model is useful to illustrate which of the following? a. How firms can minimize inventory holdings b. How inventory management affects overall firm profitability c. How increased worker compensation would enhance inventory management efficiency d. That the ROA is calculated as the ratio of net profits and total assets

b. How inventory management affects overall firm profitability

The acronym RFID stands for which of the following? a. Remote flow inspection design b. Radio frequency identification c. Residual factory inventory designation d. Random fault investigation duty

b. Radio frequency identification

For a given store, demand in Week 5 is 375, and on-hand inventory at the end of Week 4 is 450. If the manufacturing lead time for this particular item is two weeks, which of the following statements will be true? a. The order release for Week 2 will be 450 b. The order release for Week 3 will be 0 c. The order release for Week 3 will be 375 d. The order release for Week 4 will be 0

b. The order release for Week 3 will be 0

In the context of the EOQ model, the term "sawtooth" refers to which of the following? a. How aggressively managers are able to cut inventory levels b. The pattern of inventory consumption and replenishment over time c. The particular item that can be managed using the EOQ approach d. The basic tool used to build storage facilities e. All of the above f. Only C and D

b. The pattern of inventory consumption and replenishment over time

What do inventory holding costs typically amount to? a. $0.10 to $1.50 per unit b. about 15%-40% of the unit value per year c. between $25 and $45 per unit per year d. 100% of the value of a good

b. about 15%-40% of the unit value per year

The inventory performance metric that measures how efficiently inventory moves through the supply chain is a. the inventory turnover. b. the dwell time. c. the fill rate. d. the in-stock rate.

b. the dwell time.

As demand for a given product increases nine fold from one year to the next, all else equal, cycle stocks for this particular product should grow by what factor? a. 1 b. 2 c. 3 d. 4

c. 3

In the context of DRP, what is the minimum planning horizon? a. A measure of supply chain visibility b. A forecasting technique used in the retail industry c. The cumulative lead time of the critical path in a distribution system d. A gathering of top logistics executives where new distribution strategies are discussed

c. The cumulative lead time of the critical path in a distribution system

What does the EOQ model helps managers determine? a. Annual demand b. The magnitude of inventory holding costs (per unit, per year) c. The size of an individual order d. Overall firm profitability e. Both A and B

c. The size of an individual order

If the in-stock rate is 95%, which of the following is true? a. Stockouts are observed in 95% of all order cycles a. 95% of total consumer demand is filled from on-hand inventory c. There will be no stockout occurrences in 95 out of 100 order cycles d. The dwell time will be 95 days

c. There will be no stockout occurrences in 95 out of 100 order cycles

What are stockout costs? a. They are equal to inventory holding costs per unit per year b. They are trivial in most cases c. They are difficult to estimate precisely d. They are the same for every product

c. They are difficult to estimate precisely

When should distribution requirements planning be used? a. When the EOQ formula is not readily available b. To verify that the EOQ has been correctly determined c. To determine total requirements in a distribution system d. To determine a retailer's optimal order quantities

c. To determine total requirements in a distribution system

If, in a given scenario, the EOQ is 400, then what will be the average amount of cycle stock? a. 0 b. 50 c. 100 d. 200

d. 200

What does the square root law of cycle stocks suggest? a. Demand increases as the square root of cycle stocks b. The power of the law increases with cycle stocks c. The square root of cycle stocks is equal to demand d. Cycle stocks increase as the square root of demand

d. Cycle stocks increase as the square root of demand

What does the distribution requirements planning tool do? a. Decide which materials should be used in production b. Forecast store-level demand c. Design a distribution system d. None of the above e. Both A and B

d. None of the above

Retailers worldwide lose more than $400 billion in sales annually due to which of the following? a. Excessive inventory holdings b. Food waste c. Technological innovation d. Stockouts

d. Stockouts

There are 420 units of a product on hand at the beginning of Week 1. If weekly demand is 80 units, and the replenishment lead time is two weeks, the first order will need to be placed at which of the following points in time? a. The beginning of week 2 b. The beginning of week 5 c. The beginning of week 3 d. The beginning of week 4

d. The beginning of week 4

Warehouses A and B sell identical products to markets that differ in terms of customer demand. Warehouse A serves a smaller region and carries an average of 12,000 units in stock. Warehouse B serves a region that is about twice the size of the region served by Warehouse A. Based on the square root law of cycle stocks, what can you say about the inventory carried by Warehouse B? a. It is likely less than 12,000 units. b. It is likely equal to 12,000 units. c. It is likely equal to 24,000 units. d. It is likely greater than 24,000 units. e. None of the above

e. None of the above