scm 310 chapter 7

Identify the factors that are necessary to calculate the reorder point. (Check all that apply.)

- Average supplier lead time - Average demand per time period

Continuous review model Periodic review model

-Constant monitoring of inventory to decide when a replenishment order needs to be placed -Management systems built around checking and ordering inventory at some regular interval

Identify the true statements about order and setup costs. (Check all that apply.)

-In a setup cost, inventory is produced internally. -Both order costs and setup costs are typically considered to be fixed. -Order preparation, order transmittal, and order receiving are examples of order costs.

Identify the outcomes of the bullwhip effect. (Check all that apply.)

-It incites excessive expediting. -It causes increased levels of inventory. -It results in increased costs. -It introduces uneven levels of capacity utilization.

Identify the true statements about the single period inventory model. (Check all that apply.)

-It requires estimates of an expected demand and a standard deviation. - It is frequently referred to as the newsvendor problem.

Identify the advantages a company enjoys due to high turnover rate. (Check all that apply.)

-Less risk of obsolescence -Lower asset investment -Decreased expenses -Increased sales volume

Identify the disadvantages of having an extremely high inventory turn rate. (Check all that apply.)

-Lowered sales volume -Increased cost of goods sold -Increased purchasing, ordering, and receiving time, effort, and cost

Identify the different expenses that a carrying cost encompasses. (Check all that apply.)

-Opportunity cost -Costs of obsolescence, loss, and disposal -Taxes -Cost of owning and maintaining storage space -Costs of materials handling, tracking, and management -insurance

Identify the steps used in a quantitative ABC analysis. (Check all that apply.)

-Rank the items from highest to lowest percentage. -Determine the percentage of the total usage/sales by item. -Classify the items into ABC categories. -Determine annual usage/sales for each item.

Identify the assumptions underlying the economic order quantity (EOQ) formulation that often do not hold true in practice. (Check all that apply.)

-There are no quantity discounts. -There are no lot size restrictions. -Product demand is known and constant.

Identify the true statements about stockout costs. (Check all that apply.)

-When stockout costs are known to exist, a company can incur significant back ordering and expediting costs. -Stockouts cause disruptions of materials flows in the supply chain. -A company may never know the actual amount of stockout cost for a product. -A potential stockout cost is the cost of a lost sale.

Rank the steps required to determine the economic order quantity (EOQ) when quantity discounts are available in the correct order.

1 identify the price breaks offered by the supplier 2 calculate teh eoq at each price break startign with the lowest price possible 3 evaluate the feasibility of each eoq value 4 calulate the tac foe each feasible eoq and for the minumum quantity require to attain each price break 5 pick the order quantity that has the lowes tac

Which of the following best illustrates a dependent demand inventory system?

Demand for the binding of a book at a store

A multinational firm has customer demand for its product all over the world. To meet the demand, the firm has strategically placed its manufacturing facilities closer to the customer demand zones and near transportation hubs to facilitate easy transport. Which of the following does this scenario illustrate?

Enabling geographic specialization

safety

Extra inventory held to guard against uncertainty of supply or demand is known as stock.

True or false: In a firm, the demand for inventory will come only from an external customer.

False

Identify the categories of inventory performance metrics that address the issues of asset productivity. (Check all that apply.)

Inventory turnover Days of supply

Define the bullwhip effect.

It is a small disturbance generated by a customer that produces successively larger disturbances at each upstream stage in a supply chain.

Define seasonal stock.

It is the additional inventory produced in advance of seasonal peak demands.

Define transit inventory.

It is the inventory of items being transported from one location to another.

Define service level.

It is the measure of how well the objective of meeting customer demand is met.

Define reorder point.

It is the minimum level of inventory that triggers the need to order more.

Define ABC analysis.

It is the ranking of all items of an inventory according to a specific criterion of importance.

Define Pareto's law.

It is the rule that a small percentage of items account for a large percentage of sales, profit, or importance to a company.

Define a single period inventory model.

It is used to determine the order size for a one-time purchase.

-No quantity discounts / Product cost is constant regardless of quantity ordered. Product cost is constant regardless of quantity ordered. -No lot size restrictions /It is possible to order a lot size equal to the economic order quantity (EOQ). -No partial deliveries / The product is produced and delivered in a single batch. The product is produced and delivered in a single batch. -No variability / Product demand and replenishment lead time are known and constant. Product demand and replenishment lead time are known and constant. - No product interactions / The ordering of one product is not tied to the ordering of some other product. The ordering of one product is not tied to the ordering of some other product.

Match the assumptions underlying the economic order quantity (EOQ) formulation (in the left column) with their respective descriptions (in the right column).

Identify the formula used to calculate the total acquisition cost.

Order cost + Inventory carrying cost

specifies the amount of risk of incurring a stockout that a firm is willing to incur.

Service level policy

Define raw materials and component parts.

These are the items that are bought from suppliers to use in the production of a product.

Define setup costs.

They are the administrative expenses and the expenses of rearranging a work center to produce an item.

define carrying cost

They are the expenses that are incurred due to the fact that inventory is held.

Order costs

_____ are the expenses incurred in placing and receiving orders from suppliers.

Total acquisition

_____ cost is the sum of all relevant inventory costs incurred each year.

A chef orders excess ingredients for cookies than what is required to cater to sudden increase in customer demand. This scenario is an illustration of _____.

buffering for uncertainty in supply and demand

stockout

cost is the cost incurred when inventory is not available to meet demand.

order interval

is a fixed time period that passes between inventory reviews.

inventory

is a supply of items held by a firm to meet demand.

Stockout

is an event that occurs when no inventory is available.

Demand during lead time

is the amount of demand that occurs while awaiting receipt of an inventory replenishment order.

uncertainty period

is the period of time when an unknown amount of inventory is on hand.

Inventory Turnover

is the ratio between average inventory and the level of sales.

Economic Order Quantity (EOQ)

minimizes the sum of annual inventory carrying cost and annual ordering cost.

The formula zσddlt is used to calculate the _____.

safety stock

The category of inventory performance metrics that addresses effectiveness in terms of meeting demand requirements is referred to as _____.

service level

The formula σddlt = √tσ2d+d2σ2ttσd2+d2σt2 is used to calculate the

standard deviation of demand during lead time

An trexoid inventory saw-tooth diagram is an illustration of the pattern of ordering and inventory levels.

true

True or false: It is common to measure stockouts in terms of the number or percentage of inventory items for which there is no inventory on hand at the time of demand.

true

Items that are in a production process are classified as _____.

work in process inventory

Identify the formula used to calculate the economic order quantity.

√2DCoUCi2DCoUCi, where D is the annual demand, Co is the order cost, U is the unit cost, and Ci is the inventory carrying cost percentage