MKT 365 Chapter 8 (Inventory Management)

Inventory carrying costs in the United States in the 21st century have ranged between _______ and ________ percent.

19;24

_________ recognizes that all inventories are not of equal value to a firm and thus all inventories should not be managed in the same way

ABC analysis of inventory

A fixed order quantity system is more susceptible to stockout than is a fixed order interval system

False

A reorder point is equal to average daily demand divided by the length of the replenishment cycle

False

As a general rule, companies prefer to carry less inventory as the carrying costs percentage decreases

False

Buffer stock is also referred to as cycle stock

False

Different organizational functions, such as marketing and production, tend to have similar inventory management objectives

False

Efficient consumer response and collaborative planning, forecasting, and replenishment are examples of lean inventory approaches

False

Marginal analysis recognizes that all inventories should not be managed in the same way

False

The EOQ can only be calculated with respect to the number of units to be ordered

False

many grocery chains target in-stock rates of 90% for individual stores so that sufficient substitutes exist for a customer to purchase a substitutes item rather than go to a competing store

False

vendor-managed inventory can only be applies to consumer and not industrial products

False

Which of the following statements about the lean approach and JIT is false?

JIT tends to focus on product movement from manufacturer to retailer

_______ stock refers to inventory that is en route between various nodes in a logistics system

NONE OF THE ABOVE

_________ stock is carried to stimulate demand

Psychic

_________ stock refers to inventory that is held for several reasons, to include seasonal demand, projected price increases, and potential shortages of product.

Speculative

A confluence of events, such as increasing global sourcing, suggests that organizations should carefully consider the potential trade-offs before adopting a lean inventory philosophy

True

Because of smaller, more frequent order and closer supplier location, trucking tends to be an important mode of transportation in the just-in-time approach

True

Inventories are stocks of goods and materials that are maintained for many purposes

True

Inventory carries its greatest costs after value has been added through manufacturing and processing

True

Inventory flow diagrams graphically depict the demand for, and replenishment of, inventory.

True

Inventory tends to be one of the largest assets (In terms of dollar value) on a company's balance sheet

True

Lean manufacturing focuses on the elimination of waste

True

Not having enough items can be as bas as, and sometimes worse than, having too many items

True

One assumption of the basic EOQ model is a continuous, constant, and known rate of demand.

True

One requirement of a fixed order quantity system is that the inventory must be constantly monitored

True

Pipeline stock is inventory that is en route between various fixed facilities in a logistics system

True

Psychic stock is associated with retail stores

True

Safety stock can prevent against two problem areas: an increased rate of demand and longer-than-normal replenishment

True

Safety stock refers to inventory that is held in addition to cycle stock to guard against uncertainty in demand and/or lead time.

True

The EOQ is the point at which carrying costs equal ordering costs

True

the trade-off that exists between carrying costs and ordering costs is that they respond in opposite ways to the number of orders or size of orders

True

All of the following are suggestions for dealing with dead stock (inventory) except __________

a) aggressive marketing b) donate to charities c) make to order d) throw it away e) all of the above

Which of the following is not a component of ordering (order) costs?

a) costs of preparing invoices b) costs of receiving orders c) costs of verifying inventory availability d) costs of conducting a credit check e) ALL THE ABOVE

Which of the following is not a potential benefit to vendor-managed inventory?

a) reduced order errors b) improved demand forecasts c) reduced inventories d) fewer stockouts e) ALL THE ABOVE

Which of the following statements is false?

a) with respect to stockout, a delayed sale is virtually costless to a company because of the customer's brand loyalty b) the higher the average cost for a stockout, the more inventory that should be held c) tradeoffs exist between carrying costs and stockout costs d) stockout can be more costly than having too many items in stock e) ALL THE ABOVE

Each of the following is a component of inventory carrying cost except:

accounting cost

Under conditions of certainty, a reorder point is equal to ____________

average daily demand times the length of the replenishment cycle

_________ stock refers to inventory that is needed to satisfy normal demand during the course of an order cycle

base

_________ stock refers to inventory that is held in addition to cycle stock to guard against uncertainty in demand and/or lead time

buffer

The economic order quantity (EOQ) deals with calculating the proper order size with respect to ________ costs and ________ costs.

carrying; ordering

Which of the following is not an example of a lean inventory approach?

collaborative planning, forecasting, and replenishment

_________ items refer to those that are used or distributed together

complementary

Inventory turnover can be calculated by __________

dividing the cost of goods sold by average inventory

In terms of ABC analysis of inventory, no more than 25% of items should be classifies as "A"s

false

Service parts logistics has decreased in importance in recent years

false

The range of inventory carrying costs in the United States in the 21st century has been between 22 and 27 percent

false

high inventory turnover indicates that a company is taking longer to sell its inventory

false

inventory shrinkage refers tot he fact that products lose value through time

false

the number of times that inventory is sold in one year is referred to as average inventory

false

holding high levels of inventory results in _______ inventory carrying costs and ______ stockout costs

high; low

Concerning the EOQ model, if demand or annual usage increased by 10% then the EOQ will __________

increase

Inventory flow diagrams illustrate that safety stock can prevent two problem areas, _________ and __________.

increased rate of demand; longer than normal replenishment

_________ refers to stocks of goods and materials that are maintained for many purposes, the most common being to satisfy normal demand patterns.

inventory

Inventory costs in the united states in the 21st century represent approximately _______ of total logistics costs

one-third

ABC analysis of inventory ________

recognizes that inventories are not of equal value to a firm

Inventory Shrinkage

refers to the fact that more items are recorded entering than leaving warehousing facilities

Concerning the EOQ model, if the ordering costs increase by 10%, and the product value increase by 10%, the the EOQ will

stay unchanged

Which of the following is not an assumption associated with the basic economic order quantity model?

stockout are permitted

________ products refer to those that customers view as being able to fill the same need or want as another product

substitute

Which of the following situations is likely the most damaging (costly) with respect to a stockout?

the customer goes to a competitor for a purchase

All of the following statements are true, except:

the importance of individual carrying cost factors is generally consistent from product to product

The EOQ determines ___________

the point at which carrying costs equal ordering costs

In the United States, __________ has traditionally provided a convenient starting point when estimating the interest charges associated with maintaining inventory

the prime rate of interest

Which of the following statements about service parts logistics is false?

the worldwide economic slowdown of 2008 and 2009 caused a decreased emphasis on service parts logistics

complementary products can be defined as inventories that can be used or distributed together, such as razor blades and razors

true

dead stock refers to product for which there is no sales during a 12 month period

true

in vendor-managed inventory the size and timing of replenishment orders are the responsibility of the manufacturer

true

obsolescence costs are one component of inventory carrying costs

true

one logistical challenge with service parts logistics its hat it can be extremely difficult to forecast the demand of the necessary parts

true

one way of dealing with dead stock is for companies to simply throw it away

true

the higher the average cost of a stockout, there likely a company is going to want to hold some amount of inventory to protect against stockouts

true

Dead inventory (dead stock) refers to a product for which there is no sales during ________ month period

twelve

Under _________, the size and timing of replenishment order are the responsibility of the manufacturer

vendor managed inventory