SCM 460 exam 2
What type of inventory is held to account for seasonal demand variations?
Anticipation
You are the purchasing manager and you buy a raw material having the following information: Annual demand = 2000 units Fixed order quantity = 200 units Order cost = $100 / order Inventory carrying cost = 25% Per unit purchase cost = $10 / unit Safety stock = 20 On average, what is the dollar value of inventory that you will have for this material?
$1200
forms of inventories
- raw materials, purchased parts and packaging - work-in-process (WIP) - finished goods (FGI) -- MTS, larger inventories -- MTO smaller inventories - MRO items (maintenance, repair and operating items)
Functions of inventories
- transit or pipeline inventories - cycle inventories - buffer or uncertainty inventories or safety stock - anticipation or certainty inventories - decoupling inventories
CPFR stands for:
Collaborative Planning, Forecasting and Replenishment
Given the following data: Revenues = $200MM; COGS = 60% of revenues; Cost of carrying inventory = $2.4MM; carrying cost percentage = 20%. What is the value of the inventory turns for this company? [Some helpful info: Cost of carrying inventory = Inventory $ * carrying cost percentage]
10
In a 2 bin kanban system, the demand is 10 per day, lead time is 8 days, and you want to build in a 3 day safety stock. What is the kanban quantity? (How much will each bin hold?)
110
Given the following data, what is the reorder point (ROP) quantity? (Assume 5 days in a work week) Safety stock = 40 units Fixed order quantity = 500 units Replenishment lead time = 10 days Demand = 100 units per week
240
Using the data in question number 10 (above); when the first bin is empty you will place an order for the kanban quantity; how much (quantity) will remain in the second bin when the ordered material arrives?
30
ABC classification
A - 70-80% of total purchase dollars, 10% of total items purchased B - 10-15% of total purchase dollars, 10-20% of total items purchased C - 10-20% of total purchase dollars, 70-80% of total items purchased (low price items)
A company buys 10,000 unique items and has a total annual purchase volume of $10 million. A part with a unit cost of one dollar ($1.00) and an annual volume of 1,000,000 units would be classified as:
A item
fixed order quantity system is critical for
JIT
When using the EOQ model, increasing the cost of placing an individual order and decreasing the cost of carrying inventory(eg. 12% to 10%), will generally result in:
Larger order quantities
kanban quantity equation
Q = (L*D)+SS
Average inventory =
Q/2 or Q/2 + SS
EOQ = sqrt(2RS/KC)
R = annual demand S = setup or order cost per order C = delivered purchase cost K = carrying cost percentage
Nuts and bolts (hardware) procured from a local JIT vendor, and stored in point-of-use Kanbans on the factory floor, are an example of what type of inventory?
RM
Which items (A,B,C) are more important to have available for production?
They are all important
What is ABC analysis used for in purchasing?
To identify items to watch closer for inventory management...A items
For a bike manufacturer (which sells no service parts), three (3) purchased parts (rim, tire, nuts) put together as a "wheel assembly" is an example of what type of inventory?
WIP
When a carpet manufacturer predicts carpet sales by using building permits issued, mortgage rates, apartment vacancy rates, and so on, this is an example of:
a causal model
kanban
communication signal to pull product/material through the manufacturing/procurement process ex. card, container, X on the floor
EOQ (economic order quantity model) balances trade-off between...
cost of ordering and cost of carrying inventory
safety stock covers
demand and lead time
True JIT production system strive to
eliminate waste
JIT (supplier pull)
exact quantity needed at the precise moment it is required Firms focus on: - short production lead times - economical small batch production - flexible resource (labor, material and equipment) - exacting quality
EOQ is an example of a...
fixed order quantity system (inventory replaced in fixed amounts)
JIT supplier activities
frequent deliveries small lot sizes exacting quality long-term relationships/contracts reduced number of suppliers
JIT requires:
frequent deliveries of relatively small quantities
safety stock
held because of uncertainty in supply and/or demand - the trade-off is the cost of stocking out vs. the cost of holding inventory
inventory turns
how fast inventory "turning" into sales - COGS/Inventory - the higher the better
reorder point
initiates order when stock is depleted to a specific level ROP = lead time (days) * demand (days) or ROP = L*D + SS
ASN (advance shipment notification)
notifying buyer that the good will arrive sooner than planned - includes PO number and estimated delivery date
"A" items in ABC analysis are:
particularly critical in financial terms.
Capacity requirements planning (CRP):
performs for manufacturing resources what MRP does for materials.
The following cost is not a carrying, holding, or possession cost:
the purchase cost of the item.
Anticipation inventories are carried:
to cover a well-defined future need.
