gscm

What is the reorder point the sum of?

. Average lead time demand and safety stock

If, for a given product, average annual demand is 1,200 units and the average lead time is 4 months, then average lead time demand will be ________?

400 units

For a given product, average demand is 450 and the cost of overstocking is equal to the cost of understocking ($6). What will be the optimal newsvendor quantity?

450

If the optimal order quantity is 100 units and the optimal reorder point is 300 units, then which of the following is true?

An order of 100 units will be placed every time the inventory position drops to 300 units.

Larger, less frequent replenishments should be scheduled for products with greater annual usage.

False

If all else is equal, an increase in average demand will result in which of the following?

Greater average lead time demand

Which of the following best describes why 3-D printing can be a form of risk pooling?

It allows firms to print inventory on demand using the same raw materials for multiple products

In the context of inventory management, the term risk pooling refers to which of the following?

None of the above

Which of the following information sets is sufficient to calculate the optimal newsvendor quantity?

None of the above

The key objective of Walmart's Must-Arrive-By-Date policy is to do which of the following?

Reduce lead time variability

Which of the following statements about "A", "B", and "C" items are correct?

Statements I and III are correct

When stockout costs are unknown, which of the following is true?

The best option is to determine the order quantity using the basic EOQ

Customer demand uncertainty refers to which of the following?

The challenge associated with anticipating how much of a product customers will buy in a specific time period

What can be concluded if the optimal newsvendor quantity for a product with an average demand volume of 230 units and a standard deviation of 45 units is equal to 230 units?

The cost of overstocking (per unit) is equal to the cost of understocking (per unit)

If, in a newsvendor context, the cost of overstocking is greater than the cost of understocking, which of the following will occur?

The firm should strive to achieve an in-stock rate of less than 50%

Lead time uncertainty refers to which of the following?

The variability in lead times across multiple order cycles

If the cost of overstocking is equal to the cost of understocking and average demand is 220 units with a standard deviation of 80 units, the optimal newsvendor quantity . . .?

Will be equal to 220 units.

Which of the following statements about managerial/optimal reorder point models is correct?

a. In a managerial model, managers set service level targets

Risk pooling is a tool to manage and reduce which of the following?

a. Lead time demand risk

In the context of inventory classification, the term annual usage refers to which of the following?

a. The product of annual sales (in units) and unit costs

The reorder point model assumes which of the following?

all of the above

Why is the reorder point model also called the "R,Q" model?

b. It is defined by a reorder point R and an order quantity Q

When should the newsvendor model be used?

b. There is a limited selling season

If we were to graph the total cost function associated with an optimal reorder point (R,Q) model, what would the resulting graph (approximately) be?

bowl-shaped

If average lead time demand for a given product is 200 units and the reorder point is 400 units, then what is the in-stock probability?

c. Greater than 50%

Risk pooling potentially enables firms to lower which of the following?

c. Safety stock

If average demand is 25 units, and the newsvendor quantity is 22 units, then which of the following is true?

c. The cost of overstocking is greater than the cost of understocking

What would the Pareto (or 80/20) rule applied to inventory suggest?

d. 20% of a firm's SKUs account for 80% of COGS

In which of the following instances might the newsvendor model be applicable?

d. The model is most applicable in examples I, II and IV only

In the context of inventory management, the purpose of an ABC analysis is to ________.

d. identify the classes of products that represent high, medium, and low annual usage, respectively

Items with medium annual usage should have ________ safety stocks.

medium

Warehouse centralization will be most beneficial when the correlation of lead time demands what between stocking locations is...

negative

In inventory management, the primary measure of risk is . . .?

none of the above

An increase in customer demand uncertainty, all else equal, will result in greater lead time demand uncertainty.

true

If lead time demands at two stocking locations are uncorrelated, the pooled standard deviation of lead time demand will be equal to the square root of the sum of the lead time demand variances of locations 1 and 2.

true