Exam 11: Managing Inventories in Supply Chains

The single-period inventory model applies to inventory situations where demand is uncertain.

Brenda is the owner of a spa store that operates 50 weeks per year. Spair Shampoo is a high margin stock keeping unit (SKU), but the product goes out of stock frequently. She decides to use a fixed-quantity system (FQS) and orders boxes of Spair Shampoo containing 10 bottles per box from a vendor 160 miles away. She collects the following data with respect to the sales of Spair Shampoo. Demand 10 boxes per week Order Cost \ 40 per order Item Cost \ 80 per box per year Inventory-Holding Cost 15 percent per year Lead Time 3 weeks Standard Deviation in Weekly Demand 6 Service Level 96 percent Using the given data, it can be concluded that the economic order quantity (EOQ) of the Spair Shampoo boxes is:

In the context of a fixed-order-quantity system, stockouts occur whenever the lead-time demand _____.

In the context of inventory costs, _____ can reflect backorders or service interruptions for external customers.

__________applies to inventory situations in which one order is placed for a good in anticipation of a future selling season where demand is uncertain.

In a fixed-order-quantity system, when demand is uncertain, using economic order quantity (EOQ) based only on the average demand will result in a low probability of a stockout.

Vision Toys uses a fixed-quantity system to manage its inventories. The inventory includes plastic and LED bulbs. It was observed that the company often faces stockout of plastic. The average weekly demand for plastic is 100 pounds, and historical data show that the standard deviation of weekly demand is about 7. The lead time from the plastic supplier is 2 weeks. If the company's acceptable service level is 95 percent and the number of standard deviations necessary to achieve the acceptable service level is 1.645, the reorder point for plastic with safety stock is:

_____ is an additional amount of inventory that is kept over and above the average amount required to meet demand.

In the context of using technology to manage inventories, radio-frequency identification (RFID) chips offer an accuracy of less than 70 percent.

In the context of ABC inventory analysis, which of the following statements is true of class A items

In the context of inventory management, a(n) _____ is a single item or asset stored at a particular location.

Based on the constant demand assumption in the economic order quantity (EOQ) model, the average cycle inventory is:

In the context of managing inventories in supply chains,__________is the time between placement of an order and its receipt.

Using the data regarding the inventory management of a stock-keeping unit shown in the following table, it can be concluded that the optimal replenishment level with safety stock for a fixed-period system (FPS) under the model assumptions is: Demand 140 units per week Order Cost \ 30 per order Inventory-Holding Cost \ 0.4 per unit per year Lead Time 3 weeks Economic Time Interval 7 weeks Standard Deviation in Weekly Demand 8 Acceptable Service Level 95 percent Standard Deviations to Achieve the Acceptable Service Level 1.645

Using the data regarding the inventory management of a stock-keeping unit shown in the following table, it can be concluded that the economic time interval for establishing an optimal policy for a fixed-period system (FPS) under the model assumptions is: Demand 12,000 units per year Order Cost \ 50 per order Inventory-Holding Cost \ 0.5 per unit per year Lead Time 2 weeks Standard Deviation in Weekly Demand 7 Service Level 95 percent

CraftWare Inc., a furniture manufacturer, uses ABC analysis to define its inventory value. The inventory contains wood, cast iron, adhesive, and carbon fiber. If wood accounts for 50 percent of the items and 5 percent of the total dollar value; carbon fiber accounts for 10 percent of the items and 60 percent of the total dollar value; cast iron accounts for 25 percent of the items and 18 percent of the total dollar value; and adhesive accounts for 15 percent of the items and 17 percent of the total dollar value, _____ can be classified as a class C item.

Using the data regarding the inventory management of a stock-keeping unit shown in the following table, it can be concluded that the optimal replenishment level without any safety stock for a fixed-period system (FPS) under the model assumptions is: Demand 100 units per week Order Cost \ 30 per order Inventory-Holding Cost \ 0.6 per unit per year Lead Time 2 weeks Economic Time Interval 5 weeks

__________is inventory that results from purchasing or producing in larger lots than are needed for immediate consumption or sale.

Which of the following statements is true of the independent demand for a stock-keeping unit (SKU)

Marketing and operations prefer high inventory levels, whereas finance would prefer small inventories.