Ops Mgmt Exam 5 review

Which of the following statements about the A-B-C approach is/are true? Its purpose is to identify inventory items that are the most important to the business. Approximately 10% to 20% of items account for about 60% to 70% of annual dollar value. C items are the most closely managed, while A items are least important. It is intended to help firms allocate control efforts based on the relative importance of items in inventory.

Approximately 10% to 20% of items account for about 60% to 70% of annual dollar value. Its purpose is to identify inventory items that are the most important to the business. It is intended to help firms allocate control efforts based on the relative importance of items in inventory.

Which of these is NOT a factor that determines the appropriate amount of safety stock? Average quantity discount Lead time variability Desired service level Average demand rate

Average quantity discount

When carrying costs are expressed as a percentage of price, what happens to carrying costs as the quantity discount increases? Carrying costs per unit rises Carrying costs per unit stays the same Carrying costs per unit decline

Carrying costs per unit decline

Which of the following should an operations manager do if they are using discrete stocking levels? Choose the stocking level so that the desired service level is equaled or exceeded. Stock at the previous lower level than the level computed by the ratio Cs/(Cs + Ce). Use the stocking level as calculated by using the ratio Cs/(Cs + Ce). Continuously balance between shortage cost and excess cost.

Choose the stocking level so that the desired service level is equaled or exceeded.

What is the correct formula for the service level in the single period model with continuous stocking levels?

Cs/Cs+Ce

Which of the following is the correct formula for the service level in the single period model with discrete stocking levels?

Cs/Cs+Ce

What elements should a company consider when developing a supply chain code of ethics? (Select all that apply.) Customer, supplier, and company behaviors Sales and Marketing planning Environmental issues Human relations and recruitment policies

Customer, supplier, and company behaviors Environmental issues Human relations and recruitment policies

A top management responsibility with respect to supply chains is the distribution strategy. What does this area of responsibility entail? ~Using nearby suppliers, reducing transportation time and cost, reducing inventory and the risk of disruptions, and increasing responsiveness ~Deciding whether or not to centralize or decentralize distribution and if a third party logistics company should be hired ~Assessing long-term capacity needs, including when and how much will be needed and the degree of flexibility to incorporate.

Deciding whether or not to centralize or decentralize distribution and if a third party logistics company should be hired

A top management strategic responsibility with respect to supply chains is network configuration. What does this area of responsibility entail? ~Making decisions on new product and services selection and design ~Determining the number and location of suppliers, warehouses, production/operations facilities, and distribution centers ~Aligning supply and distribution strategies with organizational strategy and deciding on the degree to which outsourcing will be employed

Determining the number and location of suppliers, warehouses, production/operations facilities, and distribution centers

Which of the following is not a way inventory affects performance measures? Return on investment Ratio of inventory to sales Dividends

Dividends

At which point in an order cycle is the risk of a stockout occurring the greatest?

During the lead time for an order that has been placed

True or false: Many of the items that a firm stocks in inventory are generic regardless of the kind of business it engages in.

False

Which of the following statements about inventory costs is/are true? Shortage costs occur when there is not enough demand. Holding costs can include the cost of insurance. Purchase and ordering costs are the same. Ordering and setup costs are treated the same.

Holding costs can include the cost of insurance. Ordering and setup costs are treated the same.

What are the key questions for management concerning cycle counting? (Select all that apply.) Where should the inventory be stored? What inventory should be counted? How much accuracy is needed? Who should count it? When should cycle counting be performed?

How much accuracy is needed? Who should count it? When should cycle counting be performed?

Which of the following is/are the basic issue/s of inventory management? From which supplier to order How much to order Which carrier to use to deliver the order When to order

How much to order When to order

What are some of the many ways that global supply chains are more complex than purely domestic supply chains? (Select all that apply.) Increased transportation costs and lead times Cultural and language differences Less need for buffer inventory Currency fluctuations

Increased transportation costs and lead times Cultural and language differences Currency fluctuations

Which of the following types of inventory are items that are ready to be sold? Dependent-demand items Independent-demand items Raw materials Work-in-process items

Independent-demand items

in what ways can ERP (Enterprise Resource Planning) software effectively assist supply chain managers? (Select all that apply.) Transportation managing Production tracking Ensuring product quality Demand planning Inventory Replenishing

Inventory Replenishing Production tracking Transportation managing Demand planning

Which aspects of supply chain management are especially important for small businesses?

Inventory management International trade Risk reduction

Which of the following statements about inventory management is/are true? Inventory managers must decide how much to order. The decision when to order need not be made, it's automated in the system. Excess inventory is preferable to too little inventory. One of the goals is to keep inventory costs within reasonable bounds. One of the goals is to achieve good customer service.

Inventory managers must decide how much to order. One of the goals is to keep inventory costs within reasonable bounds. One of the goals is to achieve good customer service.

what does financial flow involve?

Involves credit terms, payments, and consignment and title ownership arrangements.

what does information flow involve?

Involves sharing forecast and sales data, transmitting orders, tracking shipments, and updating order status.

what does product and service flow involve?

Involves the movement of goods or services from suppliers to customers as well as handling customer service needs and product returns.

Which of the following statements about the fixed-order-interval model is/are true? It can produce savings in shipping costs. The order quantity is fixed. It requires continuous inventory monitoring. If demand is higher than average, the time between orders will decrease. The order point is fixed.

It can produce savings in shipping costs. The order point is fixed.

Which of the following statements about the single-period model is/are true? Multiple select question. It is used for ordering items that have a limited lifespan. Excess cost is the cost of having excess demand. Excess cost cannot exceed the purchase price of an item. Shortage cost is the cost of having too little demand. It minimizes costs of shortage and excess.

It is used for ordering items that have a limited lifespan. It minimizes costs of shortage and excess.

Which statement is true for the economic production quantity (EPQ) model? It is used only in jobs shops. It is used when production occurs in batches. Like EOQ, all orders are received in a single delivery.

It is used when production occurs in batches.

Which statement is true for the economic production quantity (EPQ) model? Like EOQ, all orders are received in a single delivery. It is used when production occurs in batches. It is used only in jobs shops.

It is used when production occurs in batches.

What are some of the potential downsides of outsourcing? (Select all that apply.) Language and cultural differences Increased transportation costs Less effort to manage the supply chain Loss of jobs Increased control

Language and cultural differences Increased transportation costs Loss of jobs

In a fixed-order-interval model, larger-than-expected demand causes which of the following situations to occur? Larger order size than expected Longer order cycle than expected No change compared to the expected order Shorter order cycle than expected

Larger order size than expected

Which of the following are assumptions of the EOQ model? Quantity discounts are available. Lead time can be variable. Lead time is known. Annual demand is known. It works for multiple products at once.

Lead time is known. Annual demand is known.

What are the five basic components of supply chain management?

Logistics Strategy Supply management Procurement Demand management

Which of the following are assumptions in the economic production quantity (EPQ) model? Only one product is involved. The usage rate varies. Usage occurs continually, but production occurs periodically. Annual demand is unknown.

Only one product is involved. Usage occurs continually, but production occurs periodically.

Which of the following is correct regarding inventory monitoring under the fixed-order-interval-model? Inventory monitoring is handled by the vendor Must monitor inventory constantly to avoid a stockout Only periodic checks of inventory required

Only periodic checks of inventory required

Which functional group generates most of the purchase orders which Procurement then processes?

Operations

Which of the following activities in the supply chain is an operational responsibility? Order fulfillment Sourcing Transportation planning Collaborating with partners

Order fulfillment

Which of the following statements about the EOQ model is/are true? As Q decreases, the annual ordering cost decreases. Orders are placed when there is just enough inventory left to cover the lead time demand. The EOQ minimizes the sum of annual ordering and holding costs. As Q decreases, the annual holding cost increases.

Orders are placed when there is just enough inventory left to cover the lead time demand. The EOQ minimizes the sum of annual ordering and holding costs.

________ inventory systems take physical inventory counts at fixed intervals and decide how much to reorder of each item.

Periodic

______ inventory systems continuously keep track of changes to the inventory system and a fixed quantity is ordered when the amount on hand reaches a predetermined level.

Perpetual

What is meant by the supply chain management practice of measuring ROI along the supply chain? ~The organization must perform a Return on Investment test on whether or not to upgrade assembly line technology. ~Each organization in the supply chain must report their ROI (Return on Investment) to the final customer ~ROI stands for Return on Investment and is a financial basis for decision making,

ROI stands for Return on Investment and is a financial basis for decision making,

Which of the following are considered types of inventory in a manufacturing facility? Raw materials In-transit goods Finished goods Maintenance and repairs Furniture used by employees Work-in-process

Raw materials Work-in-process Finished goods Maintenance and repairs In-transit goods

Which of the following actions is an example of a risk reduction strategy? Contracting with partners to spread risk. Refusing to deal with suppliers in certain areas Replacing unreliable suppliers

Replacing unreliable suppliers

Which type of inventory is held to reduce the probability of a stockout? Speculative stock Cycle stock Safety stock

Safety stock

What does the formula zσdLT represent? Safety stock given variability in demand during lead time. Safety stock given variability in demand and supplier lead time. Reorder point for variable demand during lead time

Safety stock given variability in demand during lead time.

Which of the following statements about reorder point ordering is/are true? Safety stock is required if demand is variable. Safety stock is required if lead time is variable. It is not needed with EOQ models. It is necessary for single period models.

Safety stock is required if demand is variable. Safety stock is required if lead time is variable.

In the single-period model, what is the key to determining the optimal stocking level? Safety stock Service level Stockout level

Service level

_______ cost is incurred by a firm when demand for inventory exceeds supply.

Shortage

Which of the following statements about inventory control systems is/are true? An advantage of perpetual systems is the need to continuously keep records. An advantage of periodic systems is the lack of safety stock required. Some businesses are moving towards using RFID tags to track inventory. Orders in two-bin systems may not be placed at the right time.

Some businesses are moving towards using RFID tags to track inventory. Orders in two-bin systems may not be placed at the right time.

Which function of ERP (Enterprise Resource Planning) software coordinates purchasing information, receiving information, and information about vendor ratings and performance? Supplier Relationship Management Customer Relationship Management Sales and Order Fulfillment Performance Management

Supplier Relationship Management

Choose the correct example of tactical versus operational inventory management--one of the responsibilities of supply chain managers. ~Tactical: Managing inbound deliveries from suppliers; Operational: Preparing and evaluating forecasts ~Tactical: Converting inputs into outputs; Operational: Coordinating the external supply chain. ~Tactical: Deciding where in the supply chain to hold inventory; Operational: replenishing inventory when depleted

Tactical: Deciding where in the supply chain to hold inventory; Operational: replenishing inventory when depleted

What varies in a fixed-order-interval (FOI) model? The amount of each order The amount of safety stock The timing between orders

The amount of each order

Which is the definition of holding cost in the EOQ model? The cost for receiving inventory. The cost to carry a single unit in inventory for a length of time. The cost to carry all inventory for a length of time. The cost when demand exceeds the supply of inventory.

The cost to carry a single unit in inventory for a length of time.

Which of the following is not a reason for using the fixed-order-interval model? The firm's operation does not lend itself to continuous monitoring. The firm can save on shipping costs by grouping orders from the same supplier. The firm desires to minimize inventory requirements. A supplier's policy encourages orders at fixed intervals.

The firm desires to minimize inventory requirements.

What is the definition of ordering cost? The cost of placing an order, including material costs. The cost of setting up a production run. The fixed cost of placing and receiving a single order. The amount paid for inventory.

The fixed cost of placing and receiving a single order.

Which of the following statements about the economic production quantity is/are not true? Inventory "trickles in" as it is produced. The maximum inventory level is the same as the EPQ. Unlike the EOQ model, there are no ordering costs. The assumptions are the same as in the EOQ model.

The maximum inventory level is the same as the EPQ. The assumptions are the same as in the EOQ model.

Select the best definition of Logistics. ~All activities involved in the receipt, storage, inventory and distribution of material & parts used to transform inputs into outputs. ~Transportation of material to the factory and finished goods from the factory to distributor, retailer or customer directly. ~The part of a supply chain involved with the forward and reverse flow of goods, services, cash, and information.

The part of a supply chain involved with the forward and reverse flow of goods, services, cash, and information.

What is meant by the term "reverse logistics?" Use of third-party logistics suppliers When a producer has to cancel an order made to a supplier The return of goods from customers Sending empty containers back with the supply trucks for reuse

The return of goods from customers

Select the best definition of supply chain. ~The chain of suppliers contracted by an organization, including first, second and third tier suppliers, to provide inputs for production. ~The sequence of organizations—their facilities, functions, and activities—that are involved in producing and delivering a product or service. ~The raw materials, components or other parts provided by vendors to an organization which are transformed from inputs to outputs.

The sequence of organizations—their facilities, functions, and activities—that are involved in producing and delivering a product or service.

What does 'z' represent in the safety stock formula? The stockout risk a manager is willing to accept The service level a supplier is willing to accept The reorder point a customer is willing to accept

The stockout risk a manager is willing to accept

What is the best definition of supply chain management? ~The activities within an organization to receive, store, and distribute incoming goods for the purposes of production. ~The strategic coordination of business functions within and throughout an organization's supply chain to integrate supply and demand. ~An organization's activity to manage all aspects of the vendor relationship including price, quality, and timeliness of deliveries.

The strategic coordination of business functions within and throughout an organization's supply chain to integrate supply and demand.

Which of the following best describes the two parts of the value chain--the supply and demand components? ~The supply component starts at raw material and ends in the organization. The demand component is from delivery of output to the final customer. ~The supply components are the inputs to production and the demand components are the outputs send to the next link in the chain. ~The supply component refers to the accumulated orders from multi-tiered vendors. The demand component are the accumulated customer orders.

The supply component starts at raw material and ends in the organization. The demand component is from delivery of output to the final customer.

What triggers orders in a fixed-order-interval model? Storage space freed up in a warehouse. The time since the last order An inventory level A large order received from a customer

The time since the last order

If both the demand rate and lead time are constant, how do the fixed-interval model and the fixed-quantity model compare? The risk of a stockout is higher with the fixed-quantity model. Inventory holding costs are higher for the fixed-quantity model They function identically Inventory holding costs are higher for the fixed-interval model

They function identically

Which of the below is the goal of supply chain management? To add value in the organization's transformation of the product. To return profit to the shareholders of the organization. To ensure the highest quality product for the consumer. To match supply and demand as efficiently as possible.

To match supply and demand as efficiently as possible.

Which of the following is NOT a normal function of inventory? To take advantage of quantity discounts. To hedge against price increases. To meet anticipated demand. To provide an investment vehicle. To decouple operations.

To provide an investment vehicle.

Which of the following statements about quantity discount models is/are true? If H is fixed, the cost curves have different minimum points. Total cost must include product cost to evaluate options. When H is variable, the cost curves have the same minimum point. The optimal quantity may not be the same as the EOQ.

Total cost must include product cost to evaluate options. The optimal quantity may not be the same as the EOQ.

Which of the following statements about inventory turnover is not true? Turnover is the ratio of sales to inventory. The higher the profit margins, the lower turnover can be. Generally, the higher the turnover, the better.

Turnover is the ratio of sales to inventory.

Which of the following statements about inventory control systems is/are not true? UPCs and point-of-sale systems do not work well together. An advantage of periodic systems is the lack of safety stock required. A two-bin system is a very simple way of tracking and ordering inventory Perpetual inventory systems are always able to accurately report inventory levels.

UPCs and point-of-sale systems do not work well together. An advantage of periodic systems is the lack of safety stock required. Perpetual inventory systems are always able to accurately report inventory levels.

Supply chains make use of various forms of facilities. Select all the examples of facilities from the list below. Warehouses Conveyor belts Retail outlets Factories Distribution centers Cargo containers

Warehouses Factories Distribution centers Retail outlets

Being agile means that a supply chain is flexible enough to be able to respond fairly quickly to what? Check all that apply. Weather disruptions Unpredictable changes Excess waste generated Quality issues

Weather disruptions Unpredictable changes Quality issues

For a given order cycle service level, when is it required to have more safety stock? When the lead time is variable When the demand rate is unpredictable When the lead time is fixed When the demand rate is uniform

When the lead time is variable When the demand rate is unpredictable

All of the following are current trends in supply chain management EXCEPT ____. greening the supply chain integrating information technology evaluating risks re-evaluating outsourcing adopting automated assembly lines

adopting automated assembly lines

A/An ____ supply chain has flexibility to respond to unpredictable changes or circumstances.

agile/ responsive

All of the following are potential benefits of outsourcing EXCEPT ____. lowering cost from less expensive labor shifting risk to supplier focusing on core competencies converting variable costs to fixed costs

converting variable costs to fixed costs

The overall objective of inventory management is to achieve satisfactory levels of ______ while keeping inventory ______ reasonable. customer service; costs costs; discounts discounts; costs customer service; stockout

customer service; costs

____ stock is the amount of inventory required to meet expected demand.

cycle

A service level of 95% implies a 95% probability that __________. customers will be satisfied with a firm's products demand will not exceed supply during leadtime the sales forecast is accurate

demand will not exceed supply during leadtime

In order to rank inventory items in an A-B-C analysis, we arrange annual dollar values for all items in ______. ascending order random order descending order

descending order

True or false: A company holding the major brand in the supply chain does not have to be concerned about negative media perceptions of unethical supplier practices because these suppliers are independently-owned businesses.

false

True or false: Businesses can eliminate the need for resiliency by managing risk.

false, not eliminate

In the economic production quantity (EPQ) model, the larger the production run size, the ______ the number of runs needed per year, and the _______ the annual setup cost.

fewer; lower

Technological advances in communications linking operations world-wide is a positive factor of ______.

globalization

An important aspect of supply chain management is flow management. What are the three types of flow?

goods/services, information, financial

With inventory turnover, a _____ ratio is better, because that implies more efficient use of inventory.

higher

Because firms tend to have about 30 percent of current assets invested in inventory, a reduction in inventories can result in a significant ______. increase in total sales decrease in total sales decrease in ROI increase in ROI

increase in ROI

A stock or store of goods is _______.

inventory

An alternative to extra ____ is to have backup suppliers for critical items.

inventory

How much to order, and when to order, are the two basic issues in an _______. cycle counting model inventory ordering policy A-B-C- analysis

inventory ordering policy

What does LT represent in the reorder point formula?

lead time

MRO stands for ______ inventory.

maintenance and repairs

Some of the duties of _____ are obtaining goods and services that meet or exceed operations requirements in a timely and cost-effective manner, and managing suppliers.

purchasing

Service level is the _____ that demand will not exceed supply. Service level = 100% -_____ _____.

risk stockout rate

In the economic production quantity (EPQ) model, ______ costs are analogous to ordering costs. carrying setup total

setup

One of the reasons a firm carries inventory is to ______, that is, to achieve constant output and use inventory to meet overly high requirements during seasonal periods. take advantage of quantity discounts decouple operations smooth production requirements

smooth production requirements

Inventory is a ____ or ____ of goods.

stock, store

True or false: Differences between the fixed-order interval and fixed-quantity model only become apparent when variability exists in demand or lead time.

true

Put the main steps of the purchasing cycle in order from 1 to 5 with 1 being the first step and 5 being the last.

1. receive the requisition 2. select a supplier 3. place an order 4. monitor the order 5. receive the order

For manufacturing companies approximately what percentage of the cost of finished goods comes from purchased parts and materials?

60%

For wholesalers and retailers what approximate percentage of the cost of finished goods comes from purchased inventories?

90%

If annual demand is 10,000 units and 9,000 units of demand was filled directly from inventory, with shortages totaling 1,000 units, the annual fill rate is ______. 90% 10% 99%

90%

The ______ approach classifies inventory items according to a measure of importance, such as annual dollar value.

A-B-C