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