Exam 6: Waiting Lines

Sark Incorporated is out of stock for a key item, which has a backorder of 200 units. An open order of 750 units is scheduled for arrival on the following Monday. What is the current inventory position at Sark?

The ______ determines the frequency and quantity to order.

Inventory is created when items, including materials, parts, or finished goods are disbursed faster than they are received.

Table $5.11$ The following information has been collected on an independent demand item: Demand $= 30$ units per week (assume 52 weeks/ year) Ordering and setup cost $= \$ 50$ perorder Holding cost $= \$ 8$ per unit per year Lead time $= 1$ week Standard deviation in weekly demand $= 8$ units Cycle- service level $= 90 \%$ You will need to refer to a normal table to answer the question(s). -Use the information from Table 5.11. Design a periodic review system (P system), with P = 5 weeks. What target inventory T will provide the desired 90 percent cycle- service level?

One of the ways that poorly managed inventory creates environmental waste is through scrapping of obsolescent inventory.

Assuming equivalent lead times, the period that stockout protection is needed because of demand uncertainty is longer in a periodic review (P) inventory system than in a continuous review (Q) inventory system.

Which one of the following descriptions of a base- stock system is best?

______ inventory is the portion of total inventory that varies directly with lot size.

A periodic review system is a system in which an item's inventory position is reviewed periodically rather than continuously.

Jan Tuttle is the inventory manager of an art supply store. She uses a periodic review system for all oil paints. The number of periods between orders (P) for red #69 is 15 workdays. (The store operates 50 weeks/year, 5 workdays/week.) Additional information concerning red #69 follows. Demand = 30 units/workday Standard deviation of daily demand = 4 units/workday Lead time = 7 workdays Desired cycle- service level = 85% A normal table is appended to this exam. What is the target inventory level T for red #69?

When using ABC analysis, class C items should be reviewed frequently.

The net quantity of an item available to satisfy future demand is referred to as

The following information has been collected on an independent demand item: Demand $= 30$ units per week (assume 52 weeks/ year) Ordering and setup cost $= \$ 50$ per order Holding cost $= \$ 8$ per unit per year Lead time $= 1$ week Standard deviation in weekly demand $= 8$ units Cycle- service level $= 90 \%$ You will need to refer to a normal table to answer the question(s). -Use the information from Table 5.11. Design a continuous review system (Q system) for this item, making Q equal to the EOQ. Assume that the demand during lead time is normally distributed. What are the desired values for Q and R?

Table $5.9$ Demand $= 140$ units/week Standard deviation in weekly demand $= 21$ units Ordering cost $= \$ 20$ /order Holding cost $= \$ 1$ per unit per year Cycle-service level $= 85$ percent Lead time $= 6$ w eeks You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.9. Design a continuous review system making Q equal to EOQ. What will be the economic order quantity (EOQ)?

Which one of the following statements concerning a continuous review system is best?

Identify and briefly describe the five principal functions of inventory.

Table $5.5$ You are the operations manager of a firm that uses the continuous review inventory control system. Suppose the firm operates 52 weeks a year and has the following characteristics for its primary item: -Use the information in Table 5.5. What safety stock level provides a 95 percent cycle- service level?

For a given level of annual demand (D), as the lot size Q increases, inventory holding costs increase while ordering or setup costs decrease.

For a given level of annual demand (D), as the lot size Q decreases, both inventory holding costs and ordering or setup costs decrease.

Table $5.10$ A firm using the periodic review system (P system) reviews the status of an item every 4 weeks. The standard deviation in weekly demand is 60 units. The lead time for the item is 3 weeks, whereas demand averages 200 units per week. You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.10. Suppose the firm decides on a safety stock (B) of 245 units. It is time to review the item, and the current inventory position is 700 units. How many units should be ordered? (Hint: Before answering this question, you must first compute T, the target inventory level.)