Ch 11 Master

The cost of quality has been estimated at what percentage of every sales dollar? 20-25% 5-10% 15-20% 10-15%

15-20%

A fixed-order quantity model is triggered by inventory dropping to a specified level.

True

In inventory models, high holding costs tend to favor low inventory levels and frequent replenishment.

True

In the fixed-time period model it is necessary to determine the inventory currently on hand to calculate the size of the order to place with a vendor.

True

Inventory is defined as the stock of any item or resource used in an organization.

True

One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to determine how large the orders to vendors should be.

True

One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to specify when items should be ordered.

True

One of the daily, delicate balancing acts that Logistics managers have to perform involves the trade-off between customer satisfaction and cost to serve.

True

One of the daily, delicate balancing acts that Logistics managers have to perform involves the trade-off between inventory costs and the cost of stock-outs.

True

One of the daily, delicate balancing acts that Logistics managers have to perform involves the trade-off between transportation costs and fulfillment speed.

True

One of the drivers of the direct-to-store (direct distribution) approach is the increase in global sourcing.

True

One of the drivers of the direct-to-store (direct distribution) approach is the upstream migration of value-added logistics services.

True

Shortage costs

costs of running out

When the number of needed items are computed based on the number of HIGHER-LEVEL items produced, one is operating in a(n) __________ demand environment.

dependent

In a fixed-time period inventory model, the interval of time between orders is _____ and order quantity varies.

fixed

Fixed time period models tend to have greater safety stock than

fixed order quantity models because the inventory is not tracked as closely

Which inventory system requires continuous monitoring of inventory levels?

fixed order quantity system

If manufacturing equipment within a facility produces at different rates, one can use inventory to maintain _______________ of operations.

flexibility

manufacturing inventory

generally refers to items that contribute to or become part of a firm's product output

Fixed-time period models tend to have ____ safety stock than fixed-order quantity models because the inventory is not tracked as closely.

greater

The current amount of inventory (on-hand quantity plus on-order minus backordered) is known as the

inventory position.

The current amount of inventory (on-hand quantity plus on-order minus backordered) is known as the inventory demand. inventory position. inventory available. inventory level.

inventory position.

A supply of materials at a work center allows workers to

maintain independence of operations.

Optimal order quantity (Qopt)

order size minimizes total annual inventory-related costs.

As it relates to inventory, a buyer's time expended to prepare the purchase order for more material is considered a(n) ____ cost. ordering holding buffer execution

ordering

As it relates to inventory, a buyer's time expended to prepare the purchase order for more materials is considered a(n) ____ cost.

ordering

The managerial and clerical costs to prepare purchase or production orders are called:

ordering costs

One purpose of inventory is to use a stock of inventory to provide flexibility in

production scheduling

True or false? Whether a firm uses the fixed time period or fixed order quantity model, the quantity ordered from a supplier will be about the same

true

True or false? The economic order quantity depends upon three factors, the annual demand, the setup cost, and the annual holding cost of one unit of inventory

true sqrt(2DS/H)

Single-period model

used when an item is purchased only one time and it is expected that it will be used and then not reordered

Multiple-period model

used when the item will be reordered and the intent is to maintain the item in stock

Multiple-period models

used when the item will be reordered and the intent is to maintain the item in stock

_____ is the stock of any item or resource used in an organization.

Inventory

Lean production principles

Lean layouts Lean production schedules Lean supply chains

Which category of inventory is managed most closely by the firm

"A" items

Which categories of inventory typically go through a cycle count?

"A" items "C" items "B" items

Using the fixed-order quantity model, what is the total ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $40 and a holding cost per unit per year of $45?

$5,692 Q = square root of ((2 x demand x order cost)/holding cost) = Square root ((2 x 36,000 x 40)/45) = Square root (64,000) = 252.98. Dividing annual demand by Q, 36,000/252.98 = 142.3 orders per year x $40 per order = $5,692 ordering cost per year.

main costs relevant to inventory models are

(1) the cost of the item itself (2) Holding (or carrying) costs, *(H)* -- the cost to hold an item in inventory (3) setup (or production change) costs, *(S)* (4) ordering costs (5) Shortage costs --costs incurred when an item runs short.

basic decisions that need to be made are for using inventory models are

(1) when should an item be ordered (2) how large should the order be.

classification of manufacturing inventory

* raw materials * finished products * component parts * supplies * work-in-process * in-transit (in distribution) -- inventory is being moved in the system * warehouse -- inventory in a warehouse or distribution center * Retail sites carry inventory for immediate sale to customers * In services -- inventory generally refers to the tangible goods to be sold and the supplies necessary to administer the service

Which of the following are inventory ordering costs?

- Costs associated with maintaining the tracking system - Calculating order quantities - counting items

Total annual cost is made of of three components. Match the components with their formulas.

- DC= annual purchase price - D/Q*S= Annual ordering cost - Q/2*H= Annual holding cost

Inventory

- often the largest asset on the balance sheet - can be difficult to convert back into cash

When placing an order for a single period, what is considered?

- the cost of underestimating demand - the cost of overestimating demand

Purposes of Inventory

1) To maintain independence of operations 2) To meet variation in product demand 3) To allow flexibility in production scheduling 4) To provide a safeguard for variation in raw material delivery time 5) To take advantage of economic purchase order size 6) Many other domain-specific reasons

two basic types of multiple-period models

1) fixed-order quantity model 2) fixed-time period model * key distinction - what triggers the timing of the order placement.

Inventory is expensive mainly due to

1) storage 2) obsolescence 3) insurance 4) the value of the money invested.

Which of the following is/are components of total costs in a fixed-quantity inventory system?

1. Annual ordering costs. 2. Annual holding costs. 3. Annual purchase costs.

What are the four costs that impact any decision that affects inventory size?

1. Holding (carrying) costs 2. Setup (or production change) costs 3. Ordering costs 4. Shortage Costs

Advantages of inventory

1. Maintaining independent of operations 2. Meeting variation in production demand 3. Taking advantage of economic purchase order size 4. Accommodating variability in raw material delivery time

Which of the following are inventory holding costs?

1. Opportunity cost of capital. 2. Insurance. 3. Storage facility lease.

Types of Waste

1. Overproduction 2. Waiting time 3. Transportation 4. Inventory 5. Processing 6. Motion 7. Product defects

Purposes of Inventory

1. To maintain independence of operations 2. To meet variation in product demand 3. To allow flexibility in production scheduling 4. To provide a safeguard for variation in raw material delivery time 5. To take advantage of economic purchase-order size

If annual demand is 8,000 units, the ordering cost is $20 per order and the holding cost is $12.50 per unit per year, what is the optimal order quantity using the fixed-order quantity inventory model?

160 Q = square root of ((2 x demand x order cost)/holding cost) = Square root ((2 x 8,000 x 20)/12.50) = Square root (25,600) = 160

Total quality management became a national concern in the United States during what decade? 1940s 1980s 1990s 2000s

1980s

The general belief is that the correct cost for a well-run quality management program is under 50% 10% 0% 2.5%

2.5%

In inventory management, the Pareto principle suggests that _____% of the items account for _____% of the total inventory cost.

20 80

In inventory management the Pareto principle suggests that ______ of the items accounted for ______ of the total inventory costs

20% and 80%

In inventory management, the Pareto principle suggests that _____% of the items account for _____% of the total inventory cost

20; 80

What is the minimum number of sample sets suggested for control charts with variable measurement? 20 30 35 25

25

Firm ABC has an annual demand for 2,000 widgets. Their typical order quantity is 400 units and they maintain a safety stock of 50 units. What is their average inventory?

250

How many defects per million units are permitted to meet Six Sigma standards? 4.3 3.4 10.0 6.0

3.4

"B" items account for approximately _____% of the items in inventory

35

In the ABC approach, B items account for approximately _____% of the items in inventory.

35

"B" items account for approximately _% of the items in inventory.

35%

If it takes a supplier 10 days to deliver an order once it has been placed and the standard deviation of daily demand is 14, what is the standard deviation of usage during lead time?

44.27 the answer is the square root of the sum of the variances which is the square root of 10 x (14 squared) or the square root of 1960 or 44.27.

"C" items typically account for ____% of the items, but only account for a very small percentage of the inventory cost

50%

"C" items typically account for _______% of the items, but only account for a very small percentage of the inventory costs.

50%

C items typically account for _______ of the items, but only account for a very small percentage of the inventory cost

50%

Assuming no safety stock, what is the reorder point (R) given an average daily demand of 100 units and a lead time of 5 days?

500 Reorder point = Average daily demand x Lead time in days = 100 x 5 = 500

From highest percentage to lowest percentage, rank the ABC categories in terms of value of items in inventory:

A (high dollar volume), B (moderate dollar volume), C (low dollar volume)

ABC values

A = 15% B = 35% C = 50%

Six Sigma refers to Multiple select question. The number of quality experts each firm should employ. A description of the quality goal of no more than 3.4 defects per million opportunities. The quality award given to the supplier with the fewest defects. A quality improvement philosophy and program.

A description of the quality goal of no more than 3.4 defects per million opportunities. A quality improvement philosophy and program.

Which category of inventory is managed most closely by the firm?

A items

Tracking Signal

A measure that indicates whether the forecast average is keeping pace with any genuine upward or downward changes in demand

Cycle counting

A physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year.

Exponential smoothing

A time series forecast technique in which each increment of past demand data is decreased by (1-a)

Computer cycle counting programs can produce a cycle count notice after which events?

A zero balance on-hand A specified level of activity A positive balance but a backorder was created

In order to determine the standard deviation of usage during lead time in the reorder point formula for a fixed-order quantity inventory model which of the following must be computed first? A. Standard deviation of daily demand B. Number of standard deviations for a specific service probability C. Stockout cost D. Economic order quantity E. Safety stock level

A. Standard deviation of daily demand

Maintain independence of operations

Allow the work center flexibility to work without undue influence from other work centers

fixed-time period model (P-model)

An inventory control model that specifies inventory is ordered at the end of a predetermined time period. The interval of time between orders is fixed and the order quantity varies.

fixed-order quantity model (Q-model)

An inventory control model where the amount requisitioned is fixed and the actual ordering is triggered by inventory dropping to a specified level of inventory. order is placed when inventory drops to a low level called the reorder point

Kanban pull system

An inventory or production control system that uses a signaling device to regular flows

Reorder point

An order is placed when the inventory position drops to this level.

In which step of the DMAIC cycle do you determine the most likely causes of defects and understand why defects are generated? Define Measure Analyze Improve

Analyze

Components of total costs in a fixed-quantity inventory system

Annual holding costs Annual ordering costs Annual purchase costs

The classic "I love Lucy" scene where they are inspecting the chocolates on the assembly line is an example of what type of quality cost? Appraisal External failure Internal failure Prevention

Appraisal

Which of the following is not a dimension of quality? Perceived quality Durability Appraisal Aesthetics

Appraisal

Single-period problem

Answers the question of how much to order when an item is purchased only one time and it is expected that it will be used and then not reordered

Which of the following is NOT a good reason to hold inventory?

As needed to improve company cash flow

Which of the following values for "z" should we use in as safety stock calculation if we want a service probability of 98%? A. 1.64 B. 1.96 C. 2.05 D. 2.30 E. None of the above

C. 2.05 Using the Excel function NORMSINV, the z score for a 98% service probability is 2.05.

If a vendor has correctly used marginal analysis to select their stock levels for the day (as in the newsperson problem), and the profit resulting from the last unit being sold (Cu) is $120 and the loss resulting from that unit if it is not sold (Co) is $360, which of the following is the probability of the last unit being sold? A. Greater than 0.90 B. Greater than 0.85 C. Greater than 0.75 D. Greater than 0.25 E. None of the above

C. Greater than 0.75 P < = Cu/(Cu + Co) = 120/480 = 0.25. Since P is the probability that the unit will not be sold and 1 - P is the probability of it being sold, the answer to this question is 1 - 0.25 or 0.75

Forms of inventory

Cans of lubricating fluid purchased for later use Finished products held in a warehouse Parts waiting to be assembled

Which of the following is the ratio of the range of values produced by a process divided by the range of values allowed by the design specification? Control limit Capability index Tolerance Specification limit

Capability index

Which of the following is variation that is inherent in the process itself? Assignable variation Common variation Controlled variation Real variation

Common variation

Which quality term refers to the degree to which the product or service design specifications are met? Dimension Engineering Conformance Design

Conformance

In the acronym DMAIC, what does the C stand for? Conformance Charts Continuous improvement Control

Control

Which of the following is not one of the categories of manufacturing inventory? A. Raw materials B. Finished products C. Component parts D. Just-in-time E. Supplies

D. Just-in-time

Independent demand

Demands for various items are unrelated to each other

The need for any one item is a direct result of the need for some other item, usually an item of which it is a part.

Dependent Demand

Term used to describe demand that can be accurately calculated to meet the need of a production schedule, for example

Dependent demand

Which of the following are typical objectives of process control plans? Multiple select question. Identify new design specifications. Detect shifts in the process. Provide information about whether items are meeting design specifications. Develop new processes.

Detect shifts in the process. Provide information about whether items are meeting design specifications.

_____ inventory includes items in-transit or at a warehouse ready for shipment to the customer.

Distribution

______ inventory includes in-transit items or at a warehouse ready for shipment to the customer.

Distribution

_________ inventory includes in-transit items or at a warehouse ready for shipment to the customer.

Distributions.

ABC inventory classification

Divides inventory into dollar volume categories that map into strategies appropriate for the category.

Inventory turn is calculated by

Dividing costs of goods sold by average inventory value

A fixed-order quantity model is also called a(n) ______ (acronym) or Q-model

EOQ

XYZ Company uses an inventory model where the amount requisitioned is fixed and ordering is triggered by inventory dropping to a specified level. What type of inventory system is XYZ using? Single-period Perpetual First In - First Out (FIFO) Fixed-order quantity

Fixed-order quantity

XYZ company uses an inventory model where the amount requisitioned is fixed and ordering is triggered by inventory dropping to a specified level. What type of inventory system is XYZ using?

Fixed-order quantity

Single period inventory model

Helps in situations where a company is trying to produce the optimal quantity of inventory for a single event minimizing overproduction costs and potential lost revenues

In which step of the DMAIC cycle would you identify ways to remove the cause of defects and confirm key variables? Measure Improve Control Analyze

Improve

Benefits of lean supply chain

Improve customer responsiveness Reduced obsolescence costs Reduced inventory levels

When is inventory ordered in a fixed-order quantity model? How is that similar to a fixed-time period model?

In a fixed-order quantity model, inventory is replenished (ordered) when current inventory levels fall below a safe area -- meaning, the risk of stocking out is great enough to compel us to order. In a fixed-time period model, we ordered on scheduled time intervals. This method is convenient when orders contain a variety of different products, making it more efficient to order them in groups rather than individually.

In making any decision that affects the size of inventory, what are the four categories of cost that must be considered?

In making any decision that affects inventory size, the following costs must be considered. 1. Holding (or carrying) costs. 2. Setup (or production change) costs. 3. Ordering costs. 4. Shortage costs.

If manufacturing equipment within a facility produces at different rates, one can use inventory to maintain ___________ of operations

Independence

EOQ (Fixed-order quantity model)

Inventory control model where the amount requisitioned is fixed and the actual ordering is triggered by inventory dropping to a specified level of inventory

A key financial ratio directly tied to inventory is called?

Inventory turns

According to the inventory control system matrix, if a company has highly independent products and high transaction costs, it is likely to deploy what type inventory control process? Rate-based synchronous systems Materials requirements planning Reorder point Manual two-bin

Manual two-bin

Which of the following control charts must use a sample large enough to allow counting of the attribute? C-chart Range chart Mean chart P-chart

P-chart

Because of favorable pricing in the short-term, a company is looking at ordering a LARGER-THAN-NEEDED optimal quantity of an item, and keeping excess in inventory. Which model is the company likely performing to arrive at this decision?

Price break

Because of favorable pricing in the short-term, a company is looking at ordering a larger-than-needed optimal quantity of an item, and keeping the excess in inventory. Which model is the company likely using to arrive at this decision?

Price break

Accommodate variability in raw material delivery time

Provide a buffer to absorb unexpected shortages or disruptions from vendors

Which of the following is a quality management standard developed specifically for the automobile industry? QS-9000 ISO 9000 ISO 140001 TL 9000

QS-9000

In both services and manufacturing, waste associated with defects can be reduced by improving

Quality

Which of the following is a plot of the average of the range within each sample? P chart C chart R-chart XX-chart

R-chart

Which of the following charts is used when the measure for the sample is weight, volume, number of inches or other variable measurements? Multiple select question. R-chart P-chart XX-chart C-chart

R-chart XX-chart

Which of the following is defined as the difference between the highest and lowest numbers in a sample? Range Standard deviation Mode Median

Range

Freeze window

Refers to that period of time during which the schedule is fixed and no further changes are possible

Level schedule

Requires material to be pulled into final assembly in a pattern uniform enough to allow the various elements of production to respond to pull signals

What is used to periodically check that a process is in statistical control? Scrap parts Sampling The process is only measured in the beginning 100 percent inspection

Sampling

Production change costs (the costs to produce or change between one the production of one product and another) are also known as ________________ .

Set-up Costs.

Delta Company uses special equipment and personnel to changeover production runs quickly. The costs associated with this changeover approach are considered:

Setup

Delta Company uses special equipment and personnel to changeover production RUNS quickly. The cost associated with this changeover approach are considered?

Setup costs

Concepts in lean network design

Specialize plants Collaboration with suppliers Building a lean supply chain

Inventory Models

Single period model Multiple period models: - Fixed order quantity - Fixed time period model

If a company is trying to find the optimal amount of inventory to produce for a single event, it is likely to deploy which type of inventory model?

Single-period

In statistical quality control (SQC) terminology, sigma is often called which of the following? Standard deviation Median Mode Sample average

Standard deviation

Which of the following terms describes testing a random sample of output from a process to determine whether the process is producing items within a preselected range? Statistical attribute control Statistical process control Process capability index Process tolerance limits

Statistical process control

Inventory holding costs examples

Storage facility lease Opportunity cost of capital Insurance

Which of the following is the correct total annual cost equation?

TC = DC + (D/Q)S + (Q/2)H

Which of the following is the correct total annual cost equation?

TC = DC + D/Q*S+Q/2*H

Abbreviations

TC = Total costs D = Annual demand C = cost per unit Q = Quantity S = Set up cost R = reorder point L = Lead time H = holding/carrying cost (IC) d = daily demand

Safety Stock

The amount of inventory carried in addition to the expected demand

Safety stock

The amount of inventory carried in addition to the expected demand. extra inventory that is carried for protection in case the demand for an item is greater than expected. Statistics are used to determine an appropriate amount of safety stock to carry based on the probability of stocking out

Inventory Position

The amount of inventory on-hand plus on-order minus backordered quantities. (Inv On-Hand + Inv On-Order) - Backordered Inv

Inventory Position

The amount on-hand + on-order - backordered quantities. In the case where inventory has been allocated for special purposes, the inventory position is reduced by these allocated amounts.

Inventory position

The amount on-hand plus on-order minus backordered quantities. In the case where inventory has been allocated for special purposes, --the inventory position is reduced by these allocated amounts.

Calculation of the reorder point for a fixed quantity model with safety stock requires that one knows

The average daily demand and the lead time

Mean Absolute percent error (MAPE)

The average error expressed as a percentage of demand

Mean absolute deviation (MAD)

The average forecast error using absolute values of error of each past forecast

Independent demand

The demand for various items are unrelated to each other.

Inventory turn

The expected number of times Inventory is replaced over a year

Which of the following highlights a dependent demand scenario?

The four tires needed to complete a car

A dependent demand scenario

The fur tires needed to complete a car

Price-break model

The model is useful for finding the order quantity of an item when the price of the item varies with the order size.

Dependent demand

The need for any one item is a direct result of the need for some other item

Dependent demand

The need for any one item is a direct result of the need for some other item, usually an item of which it is a part.

Which of the following are the four main issues to address in creating a control chart? Multiple select question. The number of samples The design specifications The frequency of samples The size of the samples The control limits

The number of samples The frequency of samples The size of the samples The control limits

Z value represents

The number of standard deviations associated with a given service probability

To achieve quality at the source, in general, who is responsible for ensuring that quality specifications are met? The supplier of the raw materials The person who does the work The customer is responsible for ensuring quality Customer service representative

The person who does the work

Use of employee problem solving groups to improve service practices is an example of

The respect for people element of the Toyota Production System

A price break model suggests

The selling price of an item varies with order size

Definition of Inventory System:

The set of policies and controls that monitor levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be.

Inventory system

The set of policies and controls that monster levels of inventory and determine what levels should be maintained, when stock should be replenished, and how large orders should be

Definition of Inventory:

The stock of any item or resource used in an organization and can include: raw materials, finished products, component parts, supplies, work-in-process inventory.

Inventory

The stock of any item or resource used in an organization.

Which is the best form of ISO certification? There is no best form Third party Second party First party

Third party

Optimal order quantity (Qopt)

This order size minimizes total annual cost.

Which of the following is not a cost associated with inventory management? Set up costs Transportation costs Shortage costs Holding costs

Transportation costs

The standard practice in statistical process control for variables is to set control limits to how many standard deviations from the mean? Three One Two Four

Three

Which of the following is a reason for keeping a supply of inventory? To improve cash flow To meet variation in product demand To build a bank of inventory needed for lean manufacturing To improve suppliers' cash flow

To meet variation in product demand

The sum of annual purchasing costs, annual ordering costs, and annual holding costs is known as the

Total annual cost

Which of the following is a policy and control of an inventory system? When stock should be replenished The payment terms associated with buying the stock from vendors Who should order the stock How one will finance the stock

When stock should be replenished

Which of the following is a policy and control of an inventory system?

When stock should be replenished.

If we take advantage of a quantity discount, would you expect your average inventory to go up or down? Assume that the probability of stocking out criterion stays the same

Will probably go up if the probability of stocking out stays the same

Manufactoring inventory items

Work-in-process Component parts in manufacturing Finished products

When larger samples are needed for finer variations in a process, which chart would be better suited? C-chart XX P-chart R-chart

X

Which two control charts are typically used together? Multiple select question. XX-chart C-chart P-chart R-chart

XX-chart R-chart

Stock Keeping Unit (SKU)

a unique identifier for each distinct product

Which of the following are inventory holding costs? a) storage facility lease b) opportunity cost of capital c) requisition d) I.T. network lease e) insurance

a) storage facility lease and b) opportunity cost of capital and e) insurance

Which of the following highlights a dependent demand scenario? a) the four tires needed to complete a car b) flowers purchased at a garden center c) smart phones purchased at a retailer d) gallons of milk purchased at a grocery store

a) the four tires needed to complete a car

Which of the following is considered distribution inventory? a) work-in-process inventory b) finished goods inventory in a distribution center c) inventory at a vendor's facility awaiting shipment d) raw material inventory awaiting a machining operation

b) finished goods inventory in a distribution center

Which inventory system requires continuous monitoring of inventory levels? a) fixed-time period system b) fixed-order quantity system c) single period system

b) fixed-order quantity system

Co in single period model

cost per unit of over estimating demand

To calculate the reorder point for a fixed-order quantity model with safety stock, all of the following are required except

current inventory level.

Campbell's Soup makes product for Kroger and other grocery stores based on sales to the final consumer. This inventory management environment is characterized as _ demand. a) forecasted b) dependent c) marketing d) independent

d) independent

ABC inventory classification

divides inventory into dollar volume categories that map into strategies appropriate for the category A) high dollar volume B) moderate dollar volume C) low dollar volume

Inventory turn is calculated by dividing cost of goods sold by average inventory value. dividing average inventory value by cost of goods sold. dividing prices for raw goods by the quantity ordered. dividing current inventory by average inventory value.

dividing cost of goods sold by average inventory value.

Inventory classifications of A, B and C are based on

dollar value or measure of importance.

Distribution inventory

includes in transit items or at a warehouse ready for shipment to the customer

Fixed-time period model

item is ordered at certain intervals of time

In a fixed-time period inventory model, the average demand over the vulnerable period depends on the review cycle (T) and the constant _____ time (L).

lead

The time between placing an order and receiving the item(s) is called?

lead time

The time between placing an order and receiving the item(s) is called the reorder point. lead time. demand variation. cycle count.

lead time.

In a fixed-time period system, inventory monitoring happens _ frequently than in a fixed-order quantity system.

less

In a fixed-time period system, inventory monitoring happens _____ frequently than in a fixed-order quantity system.

less

Firms enter into _____________ relationships with vendors, this changes "how many is ordered" to "how many is delivered" with each order. short-term slow turn-time quick turn-time long-term

long-term

In a single period model, CoCorepresents the cost per unit associated with the _____ estimating of demand.

over

Fixed-time ______ models tend to have greater safety stock than FIXED-ORDER quantity models because the inventory is NOT tacked as closely.

period

Cost of quality (COQ) is a primary function for the quality control department. manufacturing manager. customer service supervisor. supply chain manager.

quality control department.

Acme Company carries an additional level of inventory beyond the expected demand during reorder lead times. This additional inventory is known as safety stock. backorder stock. raw material. just-in-case supplies.

safety stock.

The purpose of _______________ is to find when the process has changed in some nonrandom way.

sampling

When a customer audits its supplier in regards to ISO certification, this form of certification is referred to as ____________. customer third party first party second party

second party

When price varies with the order size, the first step in the analysis process is to

sort the prices from lowest to highest and calculate the EOQ for each price level.

A purist view of the cost of quality is one that references all costs until 100% perfection is attained. A less stringent viewpoint is defined as the difference between 100% perfection and the industry standard. the difference between expected excellent performance and the current costs. whatever it takes to reach 100% perfection. not attainable in today's society.

the difference between expected excellent performance and the current costs.

The fixed-time period models are ____ triggered while the fixed-order quantity models are ____ triggered.

time; event

What is a reason for keeping a supply of inventory?

to meet variation in product demand

The sum of annual purchasing costs, annual ordering costs, and annual holding costs is known as the total inventory cost. total order cost. total annual cost. annual product cost.

total annual cost.

True or false: The economic order quantity depends upon three factors, the annual demand, the setup cost, and the annual holding cost of one unit of inventory.

true

True or false: When analyzing a price-break model, it is possible that the lowest price (highest quantity) will be the best choice even if the EOQ model solution for this price is infeasible.

true

The cost of quality involves the cost of Multiple select question. supplies. warranties. rework. scrap.

warranties. rework. scrap.

Fixed order quantity models assumptions

- Demand for the product is constant and uniform throughout the period - Lead time (time from ordering to receipt) is constant - Price per unit of product is constant - Inventory holding cost is based on average inventory - Ordering or setup costs are constant - All demands for the product will be satisfied

A fixed-order quantity model is also called the _____.

- Q-model - EOQ - economic order quantity

What are manufacturing inventory items?

- component parts in manufacturing - work in process - finished products

What is influenced by the customer order decoupling point?

- inventory investment - lead time

Determine Safety Stock

- keep a certain number of weeks of supply - use probability - assume demand is normally distributed - assume we know mean and standard deviation - plot normal distribution for expected demand and note where the amount we have lies on the curve

If there were no costs or loss of time in changing from one product to another, what would the impact be?

- many small lots would be produced - reduced inventory levels - costs would be lower

Inventory Costs

-Holding (or carrying) costs -Setup (or production change) costs -Ordering costs -Shortage costs

Single Period Model Applications

-Overbooking of airline flights -Ordering of clothing and other fashion items -One-time order for events - e.g. t-shirts for a concert

In cycle counting, the accuracy level recommended by experts for "A" items is +/-

0.2%.

Which of the following are assumptions that justify the costs of quality? 1. Failures occur 2. Prevention is cheaper 3. Performance can be measured 1, 2, and 3 only 1 and 2 only 2 and 3 only 1 and 3

1, 2, and 3

Using the fixed-time period inventory model, and given an average daily demand of 300 units, 4 days between inventory reviews, 5 days for lead time, 1,200 units of inventory on hand, a "z" of 1.96, and a standard deviation of demand over the review and lead time of 12 units, what quantity should be ordered?

1,525 q = (300 x (5 + 4) + 1.96 x 12) - 1200 = 2,700 + 23.52 - 1200 = 1,524.52 = about 1,525

From highest percentage to lowest percentage, rank the ABC categories in terms of dollar value of items in inventory:

1. A items 2. B items 3. C items

5 Purposes of Inventory

1. To maintain independence of operations. 2. To meet variation in product demand. 3. To allow flexibility in production scheduling. 4. To provide a safeguard for variation in raw material delivery time. 5. To take advantage of economic purchase-order size.

The z-score associated with a _____ percent probability of not stocking out is 1.64.

95

Which categories of inventory typically goes through a cycle count?

A, B, and C items

A company is planning for its financing needs and uses the basic fixed-order quantity inventory model. Which of the following is the total cost (TC) of the inventory given an annual demand of 10,000, setup cost of $32, a holding cost per unit per year of $4, an EOQ of 400 units, and a cost per unit of inventory of $150? A. $1,501,600 B. $1,498,200 C. $500,687 D. $499,313 E. None of the above

A. $1,501,600 Q = 400. Average Inventory = Q/2 = 200. Holding cost/year = $4. Thus, annual holding cost = $800. Annual set-up cost = 10,000/400 = 25 x $32 = 800. Demand x cost per unit = 10,000 x $150 = 1,500,000. Hence, TC = $1,500,000 + 800 + 800 = $1,501,600.

Using the fixed-time period inventory model, and given an average daily demand of 75 units, 10 days between inventory reviews, 2 days for lead time, 50 units of inventory on hand, a service probability of 95 percent, and a standard deviation of demand over the review and lead time of 8 units, which of the following is the order quantity? A. 863 B. 948 C. 1,044 D. 1,178 E. 4,510

A. 863 q = 75 x (10 + 2) + (1.64 x 8) - 50 = 900 + 13.12 - 50 = 863.12 = 863

Which of the following are the recommended percentage groupings of the ABC classifications of the dollar volume of products? A. A items get 15%, B items get 35%, and C items get 50% B. A items get 15%, B items get 45%, and C items get 40% C. A items get 25%, B items get 35%, and C items get 40% D. A items get 25%, B items get 15%, and C items get 60% E. A items get 20%, B items get 30%, and C items get 50%

A. A items get 15%, B items get 35%, and C items get 50% The ABC approach divides this list into three groupings by value: A items constitute roughly the top 15 percent of the items, B items the next 35 percent, and C items the last 50 percent.

You would like to use the fixed-time period inventory model to compute the desired order quantity for a company. You know that vendor lead time is 5 days and the number of days between reviews is 7. Which of the following is the standard deviation of demand over the review and lead time if the standard deviation of daily demand is 8? A. About 27.7 B. About 32.8 C. About 35.8 D. About 39.9 E. About 45.0

A. About 27.7 The standard deviation of demand over the 12 days of time between reviews and lead time is the square root of (12 x 64) = 27.71

Which of the following is not included as an inventory holding cost? A. Annualized cost of materials B. Handling C. Insurance D. Pilferage E. Storage facilities

A. Annualized cost of materials Holding costs include the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital.

Which of the following are fixed-order quantity inventory models? A. Economic order quantity model B. The ABC model C. Periodic replenishment model D. Cycle counting model E. P model

A. Economic order quantity model

If a vendor has correctly used marginal analysis to select their stock levels for the day (as in the newsperson problem), and the profit resulting from the last unit being sold (Cu) is $0.90 and the loss resulting from that unit if it is not sold (Co) is $0.50, which of the following is the probability of the last unit being sold? A. Greater than 0.357 B. Greater than 0.400 C. Greater than 0.556 D. Greater than 0.678 E. None of the above

A. Greater than 0.357 P < = Cu/(Cu + Co) = 0.90/1.40 = 0.643. Since P is the probability that the unit will not be sold and 1 - P is the probability of it being sold, the answer to this question is 1 - 0.643 or 0.357.

Firms keep supplies of inventory for which of the following reasons? A. To maintain dependence of operations B. To meet variation in product demand C. To hedge against wage increased D. In case the supplier changes the design

A. To meet variation in product demand.

The highest interest of an operating characteristic curve is between the and the _______________ LTPD.

AQL

Which term describes sampling performed on goods that already exist to determine what percentage of products conform to specifications? Conforming sampling Sampling limits Sampling error Acceptance sampling

Acceptance sampling

In any inventory system, _____ is important for a smooth production process so that customer orders can be processed as scheduled and not held up because of unavailable products.

Accuracy

Meet variation in production demand

Act as a buffer to absorb unexpected period of high demand

What are the five purposes of inventory?

All firms keep a supply of inventory for the following reasons: 1. To maintain independence of operations 2. To meet variation in product demand. 3. To allow flexibility in production scheduling. 4. To provide a safeguard for variation in raw material delivery time. 5. To take advantage of economic purchase order size.

Which of the following is not a reason to use inventory as a safeguard against raw material delivery time variation? An unexpected strike at a vendor's plant As a supplement to vendor-managed inventory programs Shortage of material at the vendor's plant Normal variation in shipping time

As a supplement to vendor-managed inventory programs

Which of the following is NOT a reason to use inventory as a safeguard against raw material delivery time variation?

As supplement to vendor-managed inventory programs

Which of the following is variation that is caused by factors that can be clearly identified? Assignable variation Common variation Random variation Normal variation

Assignable variation

The two critical components of ALL reorder point calculation scenarios are:

Average daily demand and lead time in days

Two critical components of all reorder point calculation scenarios are

Average daily demand and lead time in days

Using the probability approach to determine an inventory safety stock and wanting to be 95 percent sure of covering inventory demand, which of the following is the number of standard deviations necessary to have the 95 percent service probability assured? A. 1.28 B. 1.64 C. 1.96 D. 2.00 E. 2.18

B. 1.64 Companies using this approach generally set the probability of not stocking out at 95 percent. This means we would carry about 1.64 standard deviations of safety stock,

If it takes a supplier 25 days to deliver an order once it has been placed and the standard deviation of daily demand is 20, which of the following is the standard deviation of usage during lead time? A. 50 B. 100 C. 400 D. 1,000 E. 1,600

B. 100 the standard deviation of usage during lead time will be the square root of (25 x (20 x 20)) = square root of 10,000 = 100

If annual demand is 35,000 units, the ordering cost is $50 per order and the holding cost is $0.65 per unit per year, which of the following is the optimal order quantity using the fixed-order quantity model? A. 5,060 B. 2,320 C. 2,133 D. 2,004 E. 1,866

B. 2,320 Q = 2,320.5 = Square root of (2 x 35,000 x 50/0.65)

If it takes a supplier four days to deliver an order once it has been placed and the standard deviation of daily demand is 10, which of the following is the standard deviation of usage during lead time? A. 10 B. 20 C. 40 D. 100 E. 400

B. 20 The standard deviation of usage during lead time is equal to the square root of the sums of the variances of the number of days of lead time. Since variance equals standard deviation squared, the standard deviation of usage during lead time is the square root of 4(10x10) = square root of 400 = 20.

Assuming no safety stock, what is the reorder point (R) given an average daily demand of 78 units and a lead time of 3 days? A. 421 B. 234 C. 78 D. 26 E. 312

B. 234 78 times 3 = 234

If annual demand is 12,000 units, the ordering cost is $6 per order and the holding cost is $2.50 per unit per year, which of the following is the optimal order quantity using the fixed-order quantity model? A. 576 B. 240 C. 120.4 D. 60.56 E. 56.03

B. 240 240 = Square root of (2 x 12,000 x 6/2.5)

A company has recorded the last six days of daily demand on a single product they sell. Those values are 37, 115, 93, 112, 73, and 110. The time from when an order is placed to when it arrives at the company from its vendor is 3 days. Assuming the basic fixed-order quantity inventory model fits this situation and no safety stock is needed, which of the following is the reorder point (R)? A. 540 B. 270 C. 115 D. 90 E. 60

B. 270 Average demand is 37 + 115 + 93 + 112 + 73 + 110/6 = 90. Lead time = 3 days so the reorder point is 90 x 3 = 270.

Assuming no safety stock, what is the re-order point (R) given an average daily demand of 50 units, a lead time of 10 days and 625 units on hand? A. 550 B. 500 C. 715 D. 450 E. 475

B. 500 Fifty (50) times ten (10) equals 500.

If annual demand is 50,000 units, the ordering cost is $25 per order and the holding cost is $5 per unit per year, which of the following is the optimal order quantity using the fixed-order quantity model? A. 909 B. 707 C. 634 D. 500 E. 141

B. 707 Q = 707.1 = Square root of (2 x 50,000 x 25/5)

Using the fixed-time period inventory model, and given an average daily demand of 200 units, 4 days between inventory reviews, 5 days for lead time, 120 units of inventory on hand, a "z" of 1.96, and a standard deviation of demand over the review and lead time of 3 units, which of the following is the order quantity? A. About 1,086 B. About 1,686 C. About 1,806 D. About 2,206 E. About 2,686

B. About 1,686 q = (200 x (5 + 4) + 1.96 x 3) - 120 = 1,800 + 5.88 - 120 = 1,685.88 = about 1,686

If it takes a supplier two days to deliver an order once it has been placed and the daily demand for three days has been 120, 124, and 125, which of the following is the standard deviation of usage during lead time? A. About 2.16 B. About 3.06 C. About 4.66 D. About 5.34 E. About 9.30

B. About 3.06 The standard deviation (Equation 11.6) of daily demand = Square root of (14/3) = 2.1602. This number squared is 4.6667. The square root of (2 (days) times 4.6667) = the square root of 9.3333 or 3.055.

Which of the following is usually included as an inventory holding cost? A. Order placing B. Breakage C. Typing up an order D. Quantity discounts E. Annualized cost of materials

B. Breakage Holding costs include the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital.

Which of the following is a perpetual system for inventory management? A. Fixed-time period B. Fixed-order quantity C. P Model D. FIFO (First-in First-out)

B. Fixed-order quantity

Which of the following is a perpetual system for inventory management? A. Fixed-time period B. Fixed-order quantity C. P model D. First-in-first-out E. The wheel of inventory

B. Fixed-order quantity The fixed-order quantity model is a perpetual system, which requires that every time a withdrawal from inventory or an addition to inventory is made, records must be updated to reflect whether the reorder point has been reached.

When developing inventory cost models, which of the following are not included as costs to place an order? A. Phone calls B. Taxes C. Clerical D. Calculating quantity to order E. Postage

B. Taxes

Computer inventory systems are often programmed to produce a cycle count notice in which of the following case? A. When the record shows a near maximum balance on hand B. When the record shows positive balance but a backorder was written C. When quality problems have been discovered with the item D. When the item has become obsolete E. When the item has been misplaced in the stockroom

B. When the record shows positive balance but a backorder was written The computer can be programmed to produce a cycle count notice in the following cases: 1. When the record shows a low or zero balance on hand. 2. When the record shows a positive balance but a backorder was written 3. After some specified level of activity. 4. To signal a review based on the importance of the item (as in the ABC system)

Which of the following is one of the categories of manufacturing inventory? A. Economic Order Inventory B. Work-in-process C. Quality units D. JIT Inventory E. Re-order point

B. Work-in-process

Why are the fixed-order quantity (economic order quantity, EOQ, and Q-model) and fixed-time period model (periodic system, periodic review system) called MULTI-PERIOD INVENTORY SYSTEMS?

Because they operate on an ongoing basis. Fixed-order systems are "event-triggered" where

How is the fixed-order quantity system a perpetual inventory management system?

Because unlike systems that are based on time periods (such as fixed-order time or single-period inventory management), fixed-order quantity is fluid on an ongoing (perpetual) basis. Meaning that if the inventory levels reach a certain point, it will re-order, regardless of time or other factors. It is based on quantity, not time.

Which of the following is an operational goal of total quality management (TQM)? 1. Careful design of the product or service. 2. Ensuring that the organization's systems can consistently produce the design. 2 only Neither 1 or 2 Both 1 and 2 1 only

Both 1 and 2

Typically when using ABC classification, the low dollar value, or measure of importance, items are in group _____, while high dollar value items are in group _____.

C A

When a product or service can have more than one defect per unit, which of the following is the most appropriate chart? Range chart Mean chart P-chart C-chart

C-chart

You would like to use the fixed-time period inventory model to compute the desired order quantity for a company. You know that vendor lead time is 10 days and the number of days between reviews is 15. Which of the following is the standard deviation of demand over the review and lead time period if the standard deviation of daily demand is 10? A. 25 B. 40 C. 50 D. 73 E. 100

C. 50 the standard deviation of demand over the 25 days of time between reviews and lead time is the square root of (25 x 100) = 50

A company has recorded the last five days of daily demand on their only product. Those values are 120, 125, 124, 128, and 133. The time from when an order is placed to when it arrives at the company from its vendor is 5 days. Assuming the basic fixed-order quantity inventory model fits this situation and no safety stock is needed, which of the following is the reorder point (R)? A. 120 B. 126 C. 630 D. 950 E. 1,200

C. 630 Average demand is 120 + 125 + 124 + 128 + 133/5 = 126. Lead time = 5 days so the reorder point is 126 x 5 = 630.

The Pareto principle is best applied to which of the following inventory systems? A. EOQ B. Fixed-time period C. ABC classification D. Fixed-order quantity E. Single-period ordering system

C. ABC classification

Using the fixed-time period inventory model, and given an average daily demand of 15 units, 3 days between inventory reviews, 1 day for lead time, 30 units of inventory on hand, a service probability of 98 percent, and a standard deviation of daily demand is 3 units, which of the following is the order quantity? A. About 30.4 B. About 36.3 C. About 42.3 D. About 56.8 E. About 59.8

C. About 42.3 q = 15 x (3 + 1) + (2.05 x 6) - 30 = 60 + 12.3 - 30 = 42.3

Which of the following is the set of all cost components that make up the fixed-order quantity total annual cost (TC) function? A. Annual purchasing cost, annual ordering cost, fixed cost B. Annual holding cost, annual ordering cost, unit cost C. Annual holding cost, annual ordering cost, annual purchasing cost D. Annual lead time cost, annual holding cost, annual purchasing cost E. Annual unit cost, annual set up cost, annual purchasing cost

C. Annual holding cost, annual ordering cost, annual purchasing cost Total Annual Cost = Annual Purchase Cost + Annual Ordering Cost + Annual Holding Cost.

Which of the following is not an assumption of the basic fixed-order quantity inventory model? A. Ordering or setup costs are constant B. Inventory holding cost is based on average inventory C. Diminishing returns to scale of holding inventory D. Lead time is constant E. Demand for the product is uniform throughout the period

C. Diminishing returns to scale of holding inventory These assumptions are unrealistic, but they represent a starting point and allow us to use a simple example: 1. Demand for the product is constant and uniform throughout the period. 2. Lead time (time from ordering to receipt) is constant. 3. Price per unit of product is constant. 4. Inventory holding cost is based on average inventory. 5. Ordering or setup costs are constant. 6. All demands for the product will be satisfied. (No backorders are allowed.)

Which of the following is an assumption of the basic fixed-order quantity inventory model? A. Lead times are averaged B. Ordering costs are variable C. Price per unit of product is constant D. Back orders are allowed E. Stock-out costs are high

C. Price per unit of product is constant These assumptions are unrealistic, but they represent a starting point and allow us to use a simple example: 1. Demand for the product is constant and uniform throughout the period. 2. Lead time (time from ordering to receipt) is constant. 3. Price per unit of product is constant. 4. Inventory holding cost is based on average inventory. 5. Ordering or setup costs are constant. 6. All demands for the product will be satisfied. (No backorders are allowed.)

Firms keep supplies of inventory for which of the following reasons? A. To maintain dependence of operations B. To provide a feeling of security for the workforce C. To meet variation in product demand D. To hedge against wage increases E. In case the supplier changes the design

C. To meet variation in product demand

Holding Costs

Costs for storage, handling, insurance, and so on

In general, higher levels of inventory means higher ______ .

Costs. The goal of a JIT system is to minimize inventory, lowering setup (production change) costs.

Which of the following is not considered when calculating the order quantity in a fixed-time period model?

Current stock at the supplier

_____ _____ is a physical inventory-taking technique in which inventory is counted frequently, often times on a time-based schedule.

Cycle counting

This is an inventory auditing technique where inventory levels are checked more frequently than one time a year.

Cycle counting

______ ______ is a physical inventory-taking technique in which inventory is counted frequently, oftentimes on a time-based schedule.

Cycle counting

What is the name of a physical inventory-taking technique that focuses only on certain items and counts more often than once or twice a year?

Cycle counting is a physical inventory-taking technique in which inventory is counted frequently rather than once or twice a year

A company wants to determine its reorder point (R). Demand is variable and they want to build a safety stock into R. The company wants to have a service probability coverage of 95 percent. If average daily demand is 8, lead time is 3 days, and the standard deviation of usage during lead time is 2, which of the following is the desired value of R? A. About 17.9 B. About 19.7 C. About 24.0 D. About 27.3 E. About 31.2

D. About 27.3 Desired z score for service probability coverage of 95% = 1.64. Equation 11.5 is (average daily demand times number of days of lead time) plus (standard deviation during lead time) times (desired z score) = (8 x 3) + (2 x 1.64) = 24 + 3.28 = 27.28 = about 27.3 units

A company wants to determine its reorder point (R). Demand is variable and they want to build a safety stock into R. If the average daily demand is 12, the lead time is 5 days, the desired "z" value is 1.96, and the standard deviation of usage during lead time is 3, which of the following is the desired value of R? A. About 6 B. About 16 C. About 61 D. About 66 E. About 79

D. About 66 (average daily demand times number of days of lead time) plus (standard deviation during lead time) times (desired Z score) = (12 x 5) + (3 x 1.96) = 60 + 5.88 = 65.88 = 66 units

In making any decision that affects inventory size, which of the following costs do not need to be considered? A. Holding costs B. Setup costs C. Ordering costs D. Fixed costs E. Shortage costs

D. Fixed costs In making any decision that affects inventory size, the following costs must be considered. 1. Holding (or carrying) costs. 2. Setup (or production change) costs. 3. Ordering costs. 4. Shortage costs.

Which of the following is not one of the categories of manufacturing inventory? A. Raw Materials B. Finished products C. Component parts D. Just-in-time

D. Just-in-time Just-in-time is an inventory management method designed to keep holding costs low by keeping a low amount of inventory on hand until the last moment possible.

Which of the following is not necessary to compute the order quantity using the fixed-time period model with safety stock? A. Forecast average daily demand B. Safety stock C. Inventory currently on hand D. Ordering cost E. Lead time in days

D. Ordering cost It requires: 1. The number of days between reviews 2. Lead time in days (time between placing an order and receiving it) 3. Forecast average daily demand 4. Number of standard deviations for a specified service probability 5. Standard deviation of demand over the review and lead time 6. Current inventory level (includes items on order)

Which of the following are fixed-time period inventory models? A. The EOQ model B. The least cost method C. The Q model D. Periodic system model E. Just-in-time model

D. Periodic system model

Using the ABC classification system for inventory, which of the following is a true statement? A. The "C" items are of moderate dollar volume B. You should allocate about 50 % of the dollar volume to "B" items C. The "A" items are of low dollar volume D. The "A" items are of high dollar volume E. Inexpensive and low usage items are classified as "C" no matter how critical

D. The "A" items are of high dollar volume The ABC classification scheme divides inventory items into three groupings: high dollar volume (A), moderate dollar volume (B), and low dollar volume (C).

Which six sigma tool requires changing each individual variable to determine the most influential one? Cause-and-effect diagrams Pareto Charts Design of experiments (DOE) Flowcharts

Design of experiments (DOE)

What term refers to the inherent value of the product in the marketplace? Conformance Design quality Reliability Performance

Design quality

Using the fixed-order quantity model, which of the following is the total ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $80 and a holding cost per unit per year of $4? A. $849 B. $1,200 C. $1,889 D. $2,267 E. $2,400

E. $2,400 1,200 = Square root of (2 x 36,000 x 80/4). Number of orders per year = 36,000/1,200 = 30 x $80 = $2,400

When material is ordered from a vendor, which of the following is not a reason for delays in the order arriving on time? A. Normal variation in shipping time B. A shortage of material at the vendor's plant causing backlogs C. An unexpected strike at the vendor's plant D. A lost order E. Redundant ordering systems

E. Redundant ordering systems When material is ordered from a vendor, delays can occur for a variety of reasons: a normal variation in shipping time, a shortage of material at the vendor's plant causing backlogs, an unexpected strike at the vendor's plant or at one of the shipping companies, a lost order, or a shipment of incorrect or defective material.

Which of the following is the symbol used in the textbook for the cost of placing an order in the fixed-order quantity inventory model? A. C B. TC C. H D. Q E. S

E. S S = Setup cost or cost of placing an order

To take into consideration demand uncertainty in reorder point (R) calculations, what do we add to the product of the average daily demand and lead time in days when calculating the value of R? A. The product of average daily demand times a standard deviation of lead time B. A "z" value times the lead time in days C. The standard deviation of vendor lead time times the standard deviation of demand D. The product of lead time in days times the standard deviation of lead time E. The product of the standard deviation of demand variability and a "z" score relating to a specific service probability.

E. The product of the standard deviation of demand variability and a "z" score relating to a specific service probability.

Which of the following is not a reason to carry inventory? A. To provide a safeguard for variation in raw material delivery time B. To take advantage of economic purchase-order size C. To maintain independence of operations D. To meet variation in product demand E. To keep the stock out of the hands of competitors

E. To keep the stock out of the hands of competitors

Where in a process is there an opportunity for defects? Critical steps or activities Every step or activity Final step or activity First step or activity

Every step or activity

When determining size of a Kansan, which of the following do you need to consider

Expected demand, Safety stock, and size of container

Warranty costs and customer complaints are examples of which type of quality cost? Appraisal costs External failure costs Prevention costs Internal failure costs

External failure costs

Which tool in Six Sigma projects is a structured approach to identify, estimate, prioritize, and evaluate risk of possible failures at each stage of a process? Cause-and-effect diagrams Design of experiments Failure mode and effect analysis Opportunity flow diagrams

Failure mode and effect analysis

The fixed-order quantity model has a larger average inventory because it must also protect against stock-out during the review period, T; fixed-time period model has no review period.

False

True or False: When comparing service processes and manufacturing, the same sources of variation cause waste

False

True or False: When safety stock is carrier, the average inventory is one half the order quantity.

False

True or false: An OC curve should be shallow in the region of most interest.

False

True or false: Companies should only benchmark firms that are in the same industry to get accurate results.

False

True or false: ISO 9000 recognizes companies each year for outstanding quality management systems.

False

If demand for an item is normally distributed we plan for demand to be twice the average demand and carry 2 standard deviations worth of safety stock inventory.

False Companies using the probability approach generally set the probability of not stocking out at 95 percent. This means we would carry about 1.64 standard deviations of safety stock.

The fixed-time period inventory system has a smaller average inventory than the fixed-order quantity system because it must also protect against stockouts during the review period when inventory is checked.

False Fixed-time period model has a larger average inventory because it must also protect against stockout during the review period, T; the fixed-order quantity model has no review period.

The standard fixed-time period model assumes that inventory is never counted but determined by EOQ measures.

False Fixed-time period models generate order quantities that vary from period to period, depending on the usage rates. The standard fixed-time period models assume that inventory is counted only at the time specified for review

Safety stock is not necessary in any fixed-time period system.

False Fixed-time period models generate order quantities that vary from period to period, depending on the usage rates. These generally require a higher level of safety stock than a fixed-order quantity system.

In inventory models, high holding costs tend to favor high inventory levels.

False Holding (or carrying) costs. This broad category includes the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital. Obviously, high holding costs tend to favor low inventory levels and frequent replenishment.

Dependent demand inventory levels are usually managed by calculations using calculus-driven, cost-minimizing models.

False Independent demand, the need for any one item is a direct result of the need for some other item, usually a higher-level item of which it is part.

Price-break models deal with the fact that the selling price of an item generally increases as the order size increases.

False Price-break models deal with the fact that, generally, the selling price of an item varies with the order size.

True or False: The fixed-order quantity model has a larger average inventory because it must also protect against stock-out during the review period, T; fixed-time period model has no review period.

False Reason: The fixed-time period model has a larger average inventory because it must also protect against stock-out during the review period, T; fixed-order quantity model has no review period.

The costs associated with reduced inventory results in lower profits.

False Savings from reduced inventory results in increased profit.

In a price break model of lot sizing the lowest cost quantity is always feasible.

False Step 1. Sort the prices from lowest to highest and then, beginning with the lowest price, calculate the economic order quantity for each price level until a feasible economic order quantity is found. By feasible, we mean that the price is in the correct corresponding range. Step 2. If the first feasible economic order quantity is for the lowest price, this quantity is best and you are finished. Otherwise, calculate the total cost for the first feasible economic order quantity (you did these from lowest to highest price) and also calculate the total cost at each price break lower than the price associated with the first feasible economic order quantity. This is the lowest order quantity at which you can take advantage of the price break. The optimal Q is the one with the lowest cost.

The "sawtooth effect," named after turn-around artist Al "chainsaw" Dunlap, is the severe reduction of inventory and service levels that occurs when a firm has gone through a hostile takeover.

False The "sawtooth effect" relating Q and R in Exhibit 11.5 shows that when the inventory position drops to point R, a reorder is placed.

The average cost of inventory in the United States is 20 to 25 percent of its value.

False The average cost of inventory in the United States is 30 to 35 percent of its value.

Fixed-order quantity inventory models are "time triggered."

False The basic distinction is that fixed-order quantity models are "event triggered" and fixed-time period models are "time triggered."

Fixed-time period inventory models are "event triggered."

False The basic distinction is that fixed-order quantity models are "event triggered" and fixed-time period models are "time triggered."

The fixed-order quantity inventory model favors less expensive items because average inventory is lower.

False The fixed-order quantity model favors more expensive items because average inventory is lower.

Fixed-order quantity systems assume a random depletion of inventory, with less than an immediate order when a reorder point is reached.

False The fixed-order quantity system focuses on order quantities and reorder points. Procedurally, each time a unit is taken out of stock, the withdrawal is logged and the amount remaining in inventory is immediately compared to the reorder point. If it has dropped to this point, an order for Q items is placed. If it has not, the system remains in an idle state until the next withdrawal.

The optimal stocking decision in inventory management, when using marginal analysis, occurs at the point where the benefits derived from carrying the next unit are more than the costs for that unit.

False The optimal stocking level, using marginal analysis, occurs at the point where the expected benefits derived from carrying the next unit are less than the expected costs for that unit.

One of the drivers of the direct-to-store (direct distribution) approach is the decrease in trucking industry regulation.

False What accounts for the emergence of the direct-to-store model? Global sourcing and the upstream migration of value-added logistics services are certainly primary drivers.

Shortage costs are precise and easy to measure.

False When the stock of an item is depleted, an order for that item must either wait until the stock is replenished or be canceled. There is a trade-off between carrying stock to satisfy demand and the costs resulting from stockout. This balance is sometimes difficult to obtain, because it may not be possible to estimate lost profits, the effects of lost customers, or lateness penalties.

One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to determine the level of quality to specify.

False The basic purpose of inventory analysis in manufacturing and stockkeeping services is to specify (1) when items should be ordered and (2) how large the order should be.

True or False: When safety stock is carrier the average inventory is one half the order quantity (Q/2)

False (Q/2+SS)

True/False. The average cost of inventory in the United States is 20 to 25 percent of its value.

False, the average cost of inv in the United States is 30-35% of its value.

Which of the following is considered distribution inventory?

Finished goods inventory at a distribution center

Which of the following is considered distribution inventory? Raw material inventory awaiting a machining operation Finished goods inventory in a distribution center Work-in-process inventory Finished goods at a department store waiting to be sold

Finished goods inventory in a distribution center

Which of the following is/are manufacturing inventory items? Multiple select question. Finished products Work-in-process Component parts in manufacturing In-transit supplies

Finished products Work-in-process Component parts in manufacturing

An assumption in a p-chart calculation is that the sample size is which of the following? Fixed Variable Static Dynamic

Fixed

Which of the following is also called a periodic review system? `

Fixed-Time period

The model most appropriate when a fixed amount must be purchased each time an order is placed.

Fixed-order quantity model

Which inventory item requires continuous monitoring of inventory levels?

Fixed-order quantity system

Which inventory system requires continuous monitoring of inventory levels? Fixed-order quantity system Fixed-time period system Single period system Time to maintain systems

Fixed-order quantity system

Which multi-period inventory system is used for high-priced, critical, or important items?

Fixed-order quantity.

Which of the following is also called a periodic review system? Single-period Fixed-order quantity Perpetual Fixed-time period

Fixed-time period

The model most appropriate when inventory is replenished only in fixed intervals of time, for example, on the first Monday of each month

Fixed-time period model

In a system using group technology, workers must be _______ ________ to run several machines and processes

Flexible enough

Weighted moving average

Forecast made with past data where more recent data are given more significance than older data

Which of the following highlights a dependent demand scenario? Gallons of milk purchased at a grocery store Smart phones purchased at a retailer Four tires that are needed to complete the assembly of a car Flowers purchased at a garden center

Four tires that are needed to complete the assembly of a car

ISO documents provide detailed requirements for meeting the standards and describing the tools used for improving quality in the firm. These documents are: Specific to a particular industry. Generic, but do not apply to manufacturing. Generic and applicable to any organization. Generic, but do not apply to services.

Generic and applicable to any organization.

We are being evaluated based on the percentage of total demand met in a year (not the probability of stocking out as used in the chapter). Consider an item that we are managing using a fixed-order quantity model with safety stock. We decide to double the order quantity but leave the reorder point the same. Would you expect the percent of total demand met next year to go up or down? Why?

Go up (we are taking fewer chances of running out)

Which of the following people was not considered one of the quality gurus? Joseph Juran Henry Ford W. Edwards Deming Philip Crosby

Henry Ford

Inventory costs

Holding costs- Costs of storage, loss, handling, insurance, obsolescence Shortage costs- Costs incurred when a product is not available when ordered by a customer Set up costs- Costs associated with initiating production of a product Ordering costs- Costs associated with placing an order with a supplier

Match the inventory costs with their definition. Instructions Holding costs Setup costs Ordering costs Shortage costs Costs associated with initiating production of a product. Costs incurred when a product is not available when ordered by a customer. Costs of shortage, loss, handling, insurance, obsolescence. Costs associated with placing an order with a supplier.

Holding costs: Costs of shortage, loss, handling, insurance, obsolescence. Setup costs: Costs associated with initiating production of a product. Ordering costs: Costs associated with placing an order with a supplier. Shortage costs: Costs incurred when a product is not available when ordered by a customer.

Term used to describe demand that is uncertain and needs to be forecast.

Independent demand

What is the term for there being no relationship between demands for various items?

Independent demand In independent demand, the demands for various items are unrelated to each other.

Information shown in a value stream map

Information flow Product flow

Which of the following is an example of a variable? Inspecting a car's paint finish for blemishes Inspecting a roll of fabric for snags Inspecting a piece of lumber for knotholes Inspecting the diameter of holes drilled into a pipe

Inspecting the diameter of holes drilled into a pipe

Which of the following is not an example of when to use a c-chart? Inspecting a piece of lumber for knotholes Inspecting the diameter of holes drilled into a pipe Inspecting a roll of fabric for snags Inspecting a car's paint finish for blemishes

Inspecting the diameter of holes drilled into a pipe

Which of the following are inventory holding costs? Multiple select question. Insurance Opportunity cost of capital IT network lease Storage facility costs Requisition

Insurance Opportunity cost of capital Storage facility costs

Which type of quality cost deals with scrap, rework and repair? Prevention costs Appraisal costs Internal failure costs External failure costs

Internal failure costs

_____ turn is the ratio of costs of goods sold to average inventory value.

Inventory

______ is the stock of any item or resource used in an organization

Inventory

Which of the following is influenced by the customer order decoupling point? Multiple select question. Supplier base Quality system Inventory investment Lead time

Inventory investment Lead time

Distribution inventory

Inventory, usually spare parts and finished goods, located in the distribution system

What is influence by the customer order decoupling point

Lead time Inventory investment

When comparing service processes to manufacturing processes, one would say that they are _______ controllable

Less

When a service is being provided, who is typically responsible for ensuring quality at the source? Manufacturing manager Service technician Location operations manager Customer

Location operations manager

If the percentage of defectives in acceptance sampling is greater than a specified amount, it is termed with which of the following? UCL Acceptable LCL Low quality

Low quality

Match the advantages of inventory with their definitions. Maintain independence of operations Meet variation in product demand Take advantage of economic purchase order size Accommodate variability in raw material delivery time Provide a buffer to absorb unexpected shortages or disruptions from vendors Acts as a buffer to absorb unexpected periods of high demand Order larger quantities to reduce shipping, receiving, and clerical costs Allow the work center flexibility to work without undue influence from other work centers

Maintain independence of operations: Allow the work center flexibility to work without undue influence from other work centers Meet variation in product demand: Acts as a buffer to absorb unexpected periods of high demand Take advantage of economic purchase order size: Order larger quantities to reduce shipping, receiving, and clerical costs Accommodate variability in raw material delivery time: Provide a buffer to absorb unexpected shortages or disruptions from vendors

Expenditures related to achieving product or service quality include all of the following except: Appraisal costs Manufacturing costs Failure costs Prevention costs

Manufacturing costs

Quality of the source

Means do it right the first time and when something goes wrong, stop the process or assembly line immediately

Which distribution is used to calculate the probability of producing a defect? Exponential Weibull Poisson Normal

Normal

The graphical display of the probability of accepting lots with varying percentages of defects is termed? Lot tolerance percent defective Operating characteristic curves P-chart and C-chart Acceptance sampling

Operating characteristic curves

Take advantage of economic purchase order size

Order large quantities to reduce shipping, receiving, and clerical costs

Which analytical tool of Six Sigma breaks down a problem into the relative contributions of its components? Run charts Control charts Pareto charts Flow charts

Pareto charts

Which of the following is a form of inventory? Multiple select question. Parts waiting to be assembled Finished products held in a warehouse Raw material held in a warehouse Money owed to a firm by its customers

Parts waiting to be assembled Finished products held in a warehouse Raw material held in a warehouse

Brand name recognition is an example of which dimension of quality? Features Serviceability Reliability/durability Perceived quality

Perceived quality

Group technology

Philosophy in which similar parts are grouped into families, and the process required to make the parts are arranged in a manufacturing cell

The underlying distribution for the c-chart is which of the following? Gamma Normal Poisson Exponential

Poisson

Based on an EOQ-type ordering criterion, what cost must be taken to zero if the desire is to have an order quantity of a single unit?

Setup or ordering cost

Fashion retailers, overbooked flights, and merchandise orders for a sporting event most likely use a ______________ inventory management system.

Single-order. 1. Fashion retailers: Fashion retailers often place one order for the entire season. Costs of overestimating demand are the costs that result when products are discounted. Cost of underestimating are lost revenue on desired products. 2. Overbooked airlines: Airlines overbook to stay full with potential cancellations. Cost of underestimating demand is having empty seats on a flight. Cost of overestimating cancellations is the awards (free flights or cash payments) given to customers unable to fly. 3. Sporting events: One time sporting events merchandise is ordered in advance. Cost of underestimating demand is loss of revenue. Cost of overestimating demand is worthless inventory.

If a company is trying to find the optimal amount of inventory to produce for a single event, it is likely to deploy which type of inventory model? Single-period LIFO Fixed-order quantity Periodic

Single-period

The model most appropriate for making a one-time purchase of an item.

Single-period model

What term refers to the philosophy and methods that companies use to eliminate defects in their products and processes? DPMO Design quality Quality Six Sigma

Six Sigma

An operation that is repeatable and standardized is a good candidate for

Six Sigma Lean production

What is the preferable sample size in process control involving the measurement of variables? Large Unequal Small Variable

Small

If the process mean shifts away from the nominal value (middle) toward either the higher or lower specification, the capability index will shift which direction? Larger Smaller Median Average

Smaller

When price varies with the order size, the first step in the analysis process is to

Sort the prices from highest to lowest and calculate the EOQ for each price level

Value stream mapping

Special type of flow charting that is valuable for the development of lean processes. The technique is used to visualize product flows through various processing steps

Which concept of a lean network design relates to speed and quick response to change

Specialized plants

Which of the following is a quality management standard developed specifically for the telecommunications industry? ISO 140001 TL 9000 QS-9000 ISO 9000

TL 9000

In Services, Inventory generally refers to any __________ goods and the _________ necessary to administer the service.

Tangible, Supplies.

ISO, international standards for quality management and assurance, was developed by? International Support of Standards The International Organization of Standardization International Suppliers Organization Kaoru Ishikawa

The International Organization of Standardization

When placing an order for a single period, which of the following is considered? Multiple select question. The cost of transportation The cost of overestimating demand The cost of placing an order The cost of underestimating demand

The cost of overestimating demand The cost of underestimating demand

Which of the following is NOT a cost associated with inventory management?

Transportation

A fixed-order quantity model is triggered by inventory dropping to a specified level. True false question. True False

True

An inventory system is a set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be.

True

Cycle counting is a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year.

True

Fixed-order quantity inventory models are "event triggered."

True

Fixed-order quantity inventory systems determine the reorder point, R and the order quantity, Q values.

True

Fixed-time period inventory models are "time triggered."

True

Fixed-time period inventory models generate order quantities that vary from time period to time period, depending on the usage rate.

True

If the cost to change from producing one product to producing another were zero the lot size would be very small.

True

In a price break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price and to check to see whether the lowest cost quantity is feasible.

True

In a price break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price.

True

Price-break models deal with discrete or step changes in price as order size changes rather than a per-unit change.

True

Price-break models deal with the fact that the selling price of an item varies with the order size.

True

Safety stock can be computed when using the fixed-order quantity inventory model by multiplying a "z" value representing the number of standard deviations to achieve a service level or probability by the standard deviation of periodic demand.

True

Safety stock can be defined as the amount of inventory carried in addition to the expected demand.

True

Savings from reduced inventory results in increased profit.

True

Some inventory situations involve placing orders to cover only one demand period or to cover short-lived items at frequent intervals.

True

The "sawtooth effect," is named after the jagged shape of the graph of inventory levels over time.

True

The computation of a firm's inventory position is found by taking the inventory on hand and adding it to the on-order inventory, and then subtracting back-ordered inventory.

True

The fixed-order quantity inventory model is more appropriate for important items such as critical repair parts because there is closer monitoring and therefore quicker response to a potential stockout.

True

The fixed-order quantity inventory model requires more time to maintain because every addition or withdrawal is logged.

True

The key difference between a fixed-order quantity inventory model, where demand is known and one where demand is uncertain is in computing the reorder point.

True

True or False. One purpose of holding inventory is to meet VARIATION of product demand?

True

True or False: By taking advantage of economic purchase order sizes, one can usually achieve lower per-unit shipping costs.

True

True or False: The economic order quantity depends on three factors, the annual demand, the setup cost, and the annual holding costs of one unit of inventory.

True

True or False: When a vendor makes routine visits to a firm to take orders, a fixed-time period model may be a good choice.

True

True or False: When analyzing a price break model, it is possible that the lowest price (highest quantity) will be the best choice even if the EOQ model solution for the price is infeasible

True

True or False: Whether a firm uses the fixed-time period or fixed-order quantity model, the quantity ordered from a supplier will be about the same.

True

True or False? By taking advantage of economic purchase order sizes, one can usually achieve lower per-unit shipping costs

True

True or false: A product can have high design quality with low conformance quality, and vice versa.

True

True or false: By taking advantage of economic purchase order sizes, one can usually achieve lower per-unit shipping costs.

True

True or false: The economic order quantity depends upon three factors: the annual demand, the setup cost, and the annual holding cost of one unit of inventory.

True

True or false: The effect of setting specification limits on product design allows businesses to monitor processes against these limits.

True

True or false: The lot size has little effect on the risk associated with an acceptance sampling plan.

True

True or false: The order quantity in a fixed-order quantity model is the same, regardless if demand is known or uncertain.

True

True or false: The second step in the price-break model may not be necessary if the first feasible economic order quantity is the lowest price.

True

True or false: Total quality management requires companies to deal with all dimensions of products and services that are important to the customer.

True

True or false: When a vendor makes routine visits to a firm to take orders, a fixed-time period model may be a good choice.

True

True or false: When analyzing a price-break model, it is possible that the economic order quantity that is calculated is either higher or lower than the range to which the price corresponds.

True

True or false: When safety stock is expected to be on-hand, the average inventory value calculation is (Q/2+SS)*C.

True

Using the probability approach we assume that the demand over a period of time is normally distributed.

True

When stocked items are sold, the optimal inventory decision using marginal analysis is to stock that quantity where the probable profit from the sale or use of the last unit is equal to or greater than the probable losses if the last unit remains unsold.

True

You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit.

True

True or false: The economic order quantity depends upon three factors: the annual demand, the setup cost, and the annual holding cost of one unit of inventory.

True Reason: QoptQopt=√

True or false: The order quantity in a fixed-order quantity model is the same, regardless if demand is known or uncertain.

True Reason: If demand is uncertain, the safety stock is taken into account, but the order quantity is the same.

Uncertainly and variability

Uncertainty in time tasks Uncertainty in demand Customers production roles

_______________ and ________________ specification limits define acceptable parameters and the target value of a process.

Upper Lower

single period inventory model

Used when we are making a one-time purchase of an item - inventory only lasts one period - newsperson problem

Fixed-order quantity model

Used when we want to maintain an item "in-stock," and when we restock, a certain number of units must be ordered

What is a special type of flowcharting tool that is used in lean processing

Value stream mapping

_______________ are characteristics that can be measured numerically, such as weight, length, or diameter.

Variables

What do Six Sigma programs seek to reduce in processes? Standardization Redundancy Excess Variation

Variation

Which of the following is a policy and control of an inventory system? a) when stock should be replenished b) the payment terms associated with buying the stock from vendors c) who should order the stock d) how one will finance the stock

a) when stock should be replenished

Which of the following is/are manufacturing inventory items? a) work-in-process b) component parts in manufacturing c) in-transit supplies d) finished products

a) work-in-process and b) component parts in manufacturing and d) finished products

What is not a good reason to hold inventory?

as needed to improve company cash flow

Which of the following is also called a periodic review system? a) perpetual b) fixed-time period c) fixed-order quantity d) single-period

b) fixed-time period

If a company is trying to find the optimal amount of inventory to produce for a single event, it is likely to deploy which type of inventory model? a) fixed-order quantity b) single-period c) periodic d) LIFO

b) single-period

When calculating the reorder point for a fixed-quantity model with safety stock, the value "z" represents a) the standard deviation of demand during the lead time b) the number of standard deviations associated with a given service probability c) the expected number of stockouts each period d) the average daily demand

b) the number of standard deviations associated with a given service probability

If the sample size varies, the standard deviation and upper and lower process control limits should be recalculated only every 200 units. have new limits calculated if equipment is calibrated. remain the same once calculated. be recalculated for each sample.

be recalculated for each sample.

Stock carried to absorb variation in demand is known as ____ stock.

buffer

Which letter denotes the maximum number of defective items that can be found in the sample before the lot is rejected? a c b n

c

Which category of inventory is managed most closely by the firm? a) all items are managed the same b) "C" items c) "A" items d) no items

c) "A" items

Because of favorable pricing in the short-term, a company is looking at ordering a larger-than-needed optimal quantity of an item, and keeping the excess in inventory. Which model is the company likely using to arrive at this decision? a) cycle count b) inventory turns c) price break d) time-period

c) price break

When price varies the order size, the first step in the analysis process is to a) determine if the extreme prices are acceptable to management b) choose the highest price level and determine if the EOQ is feasible c) sort the prices from highest to lowest and calculate the EOQ for each price level

c) sort the prices from highest to lowest and calculate the EOQ for each price level

When placing an order for a single period, which of the following is considered? a) the cost of transportation b) the cost of placing an order c) the cost of underestimating demand d) the cost of overestimating demand

c) the cost of underestimating demand and d) the cost of overestimating demand

When the mean and standard deviation of a process is operating such that the control limits are acceptable relative to specification limits, the process is said to be capable. within range. acceptable. out of range.

capable.

There are two aspects to analyzing the data for benchmarking, they are Multiple select question. identifying performance measures and using the exact system for your firm. comparing actual processes. asking the firm analyzed to implement their process for your firm. comparing performance of the process against certain measures.

comparing actual processes. comparing performance of the process against certain measures.

Fixed-order quantity models assume there is _________ tracking of inventory.

continual

Setup Costs

costs for arranging specific equipment setups

Ordering costs

costs of placing an order

Each step or activity, when using six sigma, a company performs represents an opportunity for a(n) _________ to occur. mishap cost defect inspection

defect

Statistically, regardless of lot size, the probability of defects remains the same assuming that Multiple select question. there are no defects. defects are randomly spread throughout. each sample size is adjusted. the lot is randomly chosen.

defects are randomly spread throughout. the lot is randomly chosen.

Calculation of the reorder point for a fixed-quantity model with safety stock requires that one know the average daily _____ and the _____ time.

demand lead

Calculation of the reorder point for a fixed-quantity model with safety stock requires that one know the average daily ____ and the ___ time.

demand; lead

When the number of needed items are computed base don the number of higher-level items produced one is operating in a(n) ____ demand environment.

dependent

When then number of needed items are computed based on the number of higher-level items produced, one is operating in a(n) _ demand environment.

dependent

When then number of needed items are computed based on the number of higher-level items produced, one is operating in a(n) _____ demand environment.

dependent

Fixed-time period is an inventory control method where firms place orders periodically, but the order quantity is ___________ every time.

different

ISO 14000 addresses the need to be _______________ responsible.

environmentally

The economic order quantity (QoptQopt) occurs when the annual ordering and holding costs are _____.

equal

The economic order quantity occurs when the annual ordering and holding costs are

equal

If Acme groceries wanted a 0.95 probability of not stocking out, the "z" value that would be used in the calculation to find the safety stock is _______.

equal to 1.64, located in the z chart.

Demand is characterized as INDEPENDENT if it comes from sources _________ to the firm and is NOT related to other ____________.

external products

Demand is termed as independent if it comes from sources _____ to the firm and is not related to other _____.

external products

Demand is characterized as independent if comes from sources _ to the firm and is not related to other _.

external, products

Demand is characterized as independent if it comes from sources _____ to the firm and is not related to other ____.

external; products

A fixed-time period inventory model carries a ____ level of safety stock than a fixed-order quantity system.

higher

Process limits relate to how consistent the process is for making a product. the design of a part. the number of trade-offs involved in determining the upper and lower specification limits. how consistent the process is with 100% inspection.

how consistent the process is for making a product.

Campbell's Soup makes product for Kroger and other grocery stores based on sales to the final consumer. This inventory management environment is characterized as ____ demand.

independent

Campbell's Soup makes products for Kroger and other grocery stores based on sales to the final consumer. This inventory management environment is characterized as ________ demand. marketing forecasted dependent independent

independent

A single period _ model helps in situations where a company is trying to produce the optimal quantity of inventory for a single event minimizing overproduction costs and potential lost revenues.

inventory

A single-period _____ model helps in situations where a company is trying to produce the optimal quantity of inventory for a single event, minimizing overproduction costs and potential lost revenues.

inventory

The set of policies and controls that monitor levels of inventory and determine what levels should be maintained, when stock should be replenished, and how large orders should be is called a(n) _____ system.

inventory

The set of policies and controls that monitor levels of inventory and determine what levels should be maintained, when stock should be replenished, and how large orders should be is called a(n) ______ system.

inventory

When calculating the order quantity in a fixed-time period model with safety stock, the formula is Order Quantity = Average demand over the vulnerable period + safety stock - _____ currently on-hand.

inventory

A supply of materials at a work center allows workers to use just-in-time production techniques. order materials more frequently. take frequent breaks from production. maintain independence of operations.

maintain independence of operations.

Inventory Control

managing the flow of goods into, through, and out of an organization decide: 1) when items should be ordered 2) how much to order

According to the inventory control system MATRIX, if a company has highly INDEPENDENT products, but HIGH transaction costs, it is likely to deploy what type of inventory control process?

manual two-bin

Work-in-Process is considered _________ inventory.

manufacturing

Work-in-process is considered ______ inventory.

manufacturing

Work-in-process is considered a _ inventory.

manufacturing

Inventory turn

measures the expected number of times that average inventory is replaced over a year. can be calculated in aggregate using average inventory levels or on an individual item basis

Group C items may only be ordered _____ or _____ due to their low importance and value.

monthly bimonthly

In the beginning, it is best to have _______________ frequent sampling until confidence builds in the process.

more

In fixed-order quantity systems, the amount of inventory that minimizes total costs is called the _____ _____ _____.

optimal order quantity

In fixed-order quantity systems, the amount of inventory that minimizes total costs is called the _____ ______ ______.

optimal order quantity

The managerial and clerical costs to prepare purchase or production orders are called shortage costs. ordering costs. logistics costs. holding costs.

ordering costs.

Fixed-time ______ models tend to have greater safety stock than FIXED-ORDER quantity models because the inventory is NOT tacked as closely. period In a FIXED-TIM

period

Safety stock inventory levels are determined by the ____ of stock out at a given desired service level.

probability

Safety stock inventory levels are determined by the _____ of stock out at a given desired service level.

probability

Safety stock inventory levels are determined by the ___________ of STOCKOUT at a given desired service level.

probability

Which of the following is not a quality management principle in ISO 9000? process approach customer focus continual improvement product design

product design

One purpose of inventory is to provide flexibility in _______________ _______________, this can increase lead times but reduce setup costs.

production scheduling

One purpose of inventory is to use a stock of inventory to provide flexibility in ____ _____.

production scheduling

A fixed-order _ model uses a reorder point, R, to trigger an order of an optimal amount of product, labeled Q.

quantity

A fixed-order ____ model uses a reorder point, R, to trigger an order of an optimal amount of product, labeled Q.

quantity

A fixed-order _____ model uses a reorder point, R, to trigger an order of an optimal amount of product, labeled Q.

quantity

A fixed-order _________ model uses a reorder point, R, to trigger an order of an optimum amount of product, labeled Q.

quantity

In companies using fixed-order quantity inventory systems, a consistent inventory level is used as a trigger to order more product. This inventory level is called:

reorder point

In companies using a fixed-order quantity model, a consistent inventory level is used as a trigger to order more product. This inventory level is called the ordering guideline. point of entry. execution threshold. reorder point.

reorder point.

Inventory turn is the expected number of times that inventory is _ over a year.

replaced

Inventory turn is the expected number of times that inventory is ____ over a year.

replaced

In a fixed-time period model, the vulnerable period is determined by the time of ____ (T) plus the ____ time (L).

review; lead

Stock carried to absorb variation in demand is known as _______________ stock.

safety

ACME Company carries additional level of inventory beyond the expected demand during REORDER LEAD TIMES. This additional Inventory is called?

safety stock

Acme Company carries an additional level of inventory beyond the expected demand during reorder lead times. This additional inventory is called:

safety stock

A price-break model suggests that the _____ price of an item varies with order _____.

selling size

A price-break model suggests that the _ price of an item varies with order _.

selling, quantity

A price-break model suggests that the _____ price of an item varies with order ____.

selling; size

Delta Company uses special equipment and personnel to changeover production runs quickly. The costs associated with this changeover approach are considered carrying costs. rapid stock costs. purchasing costs. setup costs.

setup costs.

ISO 9000 standards are based on the _______________ quality management principles.

seven

When a customer cancels an order because of item backlogs, that lost revenue is a(n) ______ cost.

shortage

When a customer cancels an order because of item backlogs, the lost revenue is a(n) _____ cost.

shortage

When a customer cancels an order because of item backlogs, that lost revenue is a

shortage cost

Kanban

sign or instruction card in Japanese. In a paperless control system, containers can be used instead of cards Signal ex. Containers, cards, and golf ball

If a company is trying to find the optimal amount of inventory to produce for a single event, it is likely to deploy which type of inventory model?

single-period

Southern Printing Corp. produces high-end booklets for university graduations listing all the participating students at a given university. What inventory model would Southern use to optimize the amount of booklet inventory produced for each graduation?

single-period

For a process to be considered six sigma capable, the design specification limits are _______________ standard deviations away from the process mean.

six

Design quality is considered a(n) __________ for the firm. strategic decision unimportant decision service decision insignificant cost

strategic decision

In services, inventory generally refers to any

tangible good and the supplies necessary to administer the service

Since it is not easy to determine how well a sampling plan discriminates between good and bad quality, you should always examine __________ before using a sampling plan. the P-chart an R-chart the C-chart the OC curve

the OC curve

Safety Stock

the amount of inventory carried in addition to the expected demand

When choosing how often to take samples, there is a trade-off between the costs of sampling and the number of employees in the quality department. the readings from the last set of samples. the amount of time it takes to get the sample. the benefit of adjusting the system.

the benefit of adjusting the system.

ISO 14000 has a three-pronged approach that includes Multiple select question. the development of environmentally friendly products and services. environmental management requirements. standards for monitoring air, water, and soil. the cheapest cost for raw materials among all suppliers.

the development of environmentally friendly products and services. environmental management requirements. standards for monitoring air, water, and soil.

Inventory turn

the expected number of times that inventory is replaced over a year - cost of goods sold/ average inventory value

Inventory turn is a key measure for a business and directly relates to the supply chain manager's performance. the quality of management. the price paid for raw materials. the financial performance of the firm.

the financial performance of the firm.

When calculating the reorder point for a fixed-quantity model with safety stock, the value "z" represents

the number of standard deviations associated with a given service probability.

When placing an order for a single period, the order quantity should be increased as long as

the probability of selling what is ordered is less than or equal to Cu/Cu+Co

When placing an order for a single period, the order quantity should be increased as long as the probability of selling what is ordered is less than or equal to Co/Cu-Co the probability of selling what is ordered is greater than Cu/Cu+Co the probability of selling what is ordered is less than or equal to Cu/Cu+Co

the probability of selling what is ordered is less than or equal to Cu/Cu+Co

Safety stock inventory levels are determined by

the probability of stockout at a given desired service level

inventory system

the set of policies and controls that monitor levels of inventory and determine what levels should be maintained, when stock should be replenished, and how large orders should be. provides a specific operating policy for managing items to be stock. Other than defining the timing and sizing of orders, the system needs to track the exact status of these orders -(have the orders been received by the supplier, have they been shipped, what date is each expected, etc.).

Inventory System

the set of policies and controls that monitor levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be

In constructing any inventory model, there has to be a functional relationship between the

variable of interest and the measure of effectiveness.

In constructing any inventory model, there has to be a functional relationship between the variable of interest and the measure of effectiveness. average product costs and average daily lead time. order cycle time and transportation costs. annual demand and lead time in days.

variable of interest and the measure of effectiveness.

When measurements from periodic samples stay _______________ the control limits, the process can be assumed to be working properly.

within

Manufacturing Inventory

work in process

Which of the following is/are components of total costs in a fixed-quantity inventory system?

• Annual ordering costs • Annual holding costs • Annual purchase costs

Which of the following is a form of inventory?

• Finished products held in a warehouse • Cans of lubricating fluid purchased for later use • Parts waiting to be assembled

Which of the following is influenced by the customer order decoupling point?

• Inventory investment • Lead time

Which of the following are inventory holding costs?

• Opportunity cost of capital • Storage facility lease • Insurance

When placing an order for a single period, which of the following is considered?

• The cost of overestimating demand • The cost of underestimating demand

Which of the following is/are manufacturing inventory items?

• Work-in-process • Finished Products • Component parts in manufacturing