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.