Mgmt423 Ch8

T/F: Dependent demand items are part of a larger component or product, and use is derived from the production schedule for the larger component.

True

T/F: In Kanban systems large raw material inventories are unnecessary.

True

T/F: MRP II systems link the organization's planning processes with its financial system to produce "what if" scenarios to help achieve sales and profitability projections.

True

When a retailer uses daily sales of each product to identify patterns and to forecast inventory requirements, this is an example of:

a time series forecasting technique.

The three main inputs of a material requirements planning (MRP) system are:

an accurate bill of material, a master production schedule, and the inventory record.

Which statement is most accurate when thinking about deciding how much to buy:

balancing price, volume, carrying cost, and the cost of stockouts is key to successfully determining how much to buy at any point in time.

On an annual requirement of 100 items spread evenly throughout the year, any purchaser has an opportunity of buying all 100 units at a price of $100 each, or buying 10 units at a time at a price of $120. If the inventory carrying cost is 25 percent per year and assuming no ordering costs:

buying 100 at a time will save the company $900 per year.

Stockout costs:

can vary depending on whether it is a seller's or a buyer's market.

Inventory use that is determined directly by customer orders is called:

independent demand

When the carrying cost of inventory is expressed as a percentage:

it is multiplied by the material unit cost to calculate the per unit carrying cost.

"A" items in ABC analysis are:

particularly critical in financial terms.

Closed-loop MRP:

provides a feedback loop between capacity and the master production schedule.

T/F: For the supply management function, time-based strategies that impact competitive advantage relate to cycle time reductions and greater coordination of materials and information flows.

True

T/F: ABC analysis categorizes purchases or inventory into different groups, normally based on the value or impact on the profitability of the organization.

False

T/F: CPFR is a business practice in which multiple trading partners agree to exchange knowledge and share risks to generate the most accurate forecast possible and develop effective replenishment plans.

True

A buffer inventory:

protects against uncertainties in supply and demand.

T/F: In fixed period inventory models, orders are placed when the reorder point is reached.

False

T/F: JIT requires infrequent deliveries of relatively large quantities in compliance with quality standards.

False

T/F: Service coverage is the ability of purchasing to meet the needs of its internal customers.

False

T/F: The basic elements of inventory carrying costs are capital costs, inventory service costs, storage space costs, and projected costs of lost sales..

False