BUSMGT Chapter 20: Inventory management

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

50

The _______________________ inventory classification scheme divides inventory items into three groupings: high dollar volume, moderate dollar volume, and low dollar volume.

ABC

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.

Single-period problem

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

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

Cycle counting

Select all that apply Which of the following affect safety stock levels in a fixed-order quantity model? Check all that apply. Lead time in days Reorder point in units Desired service level Standard deviation of usage during lead time

Desired service level Standard deviation of usage during lead time

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

Distribution

Demand is characterized as independent if it comes from sources_________________ to the firm and is not related to other __________________.

External, outside, or foreign products, parts, inventory, or items

Which of the following is considered to be warehouse inventory? Work-in-process inventory Finished goods inventory in a distribution center Inventory at a vendor's facility awaiting shipment Raw material inventory awaiting a machining operation

Finished goods inventory in a distribution center

Which model is more likely to have a stock out? Fixed-time period Fixed-order quantity system Both are equally likely, depending on the desired service level used

Fixed-time period

An _________________ ________________system provides the organizational structure and the operating policies for maintaining and controlling goods to be stocked.

Inventory control

A key financial ratio directly tied to inventory is called? Earnings per share Debt ratio Inventory turns Cost of goods sold

Inventory turns

Which of the following indicates when the inventory position drops to the reorder level, as per a fixed-order quantity model? R N T Q

R

Delta Company uses special equipment and personnel to changeover production runs quickly. The costs associated with this changeover approach are considered Purchasing costs Setup costs Carrying costs Rapid stock costs

Setup costs

Which order cost is frequently little more than a guess? Setup Ordering Holding Shortage

Shortage

Select all that apply Which of the following affect safety stock levels in a fixed-order quantity model? Check all that apply. Standard deviation of usage during lead time Reorder point in units Lead time in days Desired service level

Standard deviation of usage during lead time Desired service level

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.

Optimal order quantity (Qopt)

This order size minimizes total annual cost.

Select all that apply An inventory control system is responsible for which of the following? Finding the best price for goods Timing the order placement Keeping track of what has been ordered Receiving goods Ordering goods Selecting new vendors

Timing the order placement Keeping track of what has been ordered Receiving goods Ordering goods

Select all that apply Which of the following is/are manufacturing inventory items? In-transit supplies Work-in-process Finished products Component parts in manufacturing

Work-in-process Finished products Component parts in manufacturing

Inventory turn

a measure of the expected number of times inventory is replaced over a year

Cycle counting

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

Inventory

all the money that the system has invested in purchasing things it intends to sell

Reorder point (R)

an order is placed when inventory drops to this level

The two critical components of ALL reorder point calculation scenarios are: average daily demand and lead time in days annual demand and lead time in days average product costs and average daily lead time order cycle time and transportation costs

average daily demand and lead time in days

A _________________ is when the order is held and filled at a later date when the inventory for the item is replenished.

backorder

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

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

distribution

ABC inventory classific

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

Fixed-order quantity models are _____________ triggered.

event

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 forecasted dependent marketing

independent

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

lead time

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

ordering

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

ordering costs

The fixed-order quantity model is a _______________ 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.

perpetual

The fixed-order quantity model is a __________________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.

perpetual

If safety stock is ______________, the effect is to place a reorder sooner.

positive

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

probability, chance, or likelihood

Safety Stock

the amount of inventory carried in addition to the expected demand

Independent demand

the demands for these items are unrelated to each other, or to activities that can be predicted with certainty

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. Also, when the demand for the item can be predicted with accuracy due to a schedule or specific activity

Price-break model

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

Fixed-time-period models are ______________ triggered.

time

The probability approach to determining safety stock considers only the probability of running out of stock, not how ______________ many we are short.

units

This is safety stock. zσT+L q I A d(T+L)

zσT+L