Exam 6: Waiting Lines

______ is the number of orders filled completely relative to the total number of orders.

Customer orders waiting to be processed are called an order backlog.

An advantage of continuous review (Q) inventory systems relative to periodic review (P) inventory systems is that lower levels of safety stock provide savings in holding costs.

A backorder is an order that cannot be filled at the time the customer places the order, resulting in a lost sale.

Shutting down more frequently but for shorter periods of time for preventive maintenance will generally reduce the quantity of decoupling inventory needed.

A continuous review system is sometimes called a reorder point system.

Sensitivity analysis on the economic order quantity (EOQ) formula can help the operations manager answer several questions on how to manage inventories. Which one of the following questions is NOT answered by EOQ sensitivity analysis?

One of the secondary levers for reducing pipeline inventory is to

Protection interval is the time interval for which inventory must be planned when each new order is placed.

A company is more likely to place its inventory close to customers as finished goods for standard items than it is for special items.

Table $5.9$ Demand $= 140$ units $/$ wee k 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 $= 6$ weeks You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.9. Assume demand during lead time to be normally distributed. For a continuous review system, what should be the reorder point (R)?

Which of the following statements regarding a periodic review (P) system for inventory control is FALSE?

For a company that manufactures most of its products as standards, more inventory should be placed

Table $5.3$ The Medfield Import Autoparts Company imports and sells standard air filters for most Japanese cars, and it operates under the continuous review system. The average demand for this item is 1200 units per month ( 14,400 per year), and the standard deviation in monthly demand is 250 units. It costs the company $\$ 225$ to process each order, and the lead time is 2 months. The holding cost for one unit is $\$ 0.50$ per year, and the company policy is to maintain a 95 percent cycle- service level. You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.3. What is the EOQ (economic order quantity) for this air filter?

The primary reason for keeping inventories low is that inventory represents a temporary monetary investment in goods on which a firm must pay interest.

Pipeline inventory is inventory that is moved from point to point within the material flow system.

The Franklin County Hospital is currently using a continuous review system to control its inventory. One of the items in inventory is an elastic band. The average demand for this item is 200 boxes per week, and the standard deviation in weekly demand is 50 boxes. If the lead time is 3 weeks and the hospital wants a 99 percent cycle- service level, what is the reorder point for this item? A normal table is appended to this exam.

______ inventory accommodates the different processing rates of individual operations in a process, smoothing the flow of items.

Inventory reduces the potential for stockouts and backorders.

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 $= 6$ weeks You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.9. Design a periodic review system with P = 4 weeks. Assume demand during lead time plus review period to be normally distributed. What target inventory will provide the desired cycle- service level of 85 percent?