Exam 9: Inventory Management

Scenario 9.12 Demand = 100,000 units/year Number of days per year = 250 weeks Standard deviation of weekly demand = 50 units Average lead time = 5 days Standard deviation of lead time: 2 days Cycle-service level = 99% A continuous review system is used to control inventory. -Use the information in Scenario 9.12. If the firm decides to reduce its cycle-service level to 95%, what is the new reorder point if all other parameters remain the same for this product?

________ inventory is the inventory moving from point to point in the materials flow system.

A backorder occurs when a customer order cannot be filled when it is placed, but is instead filled later.

Setup cost is independent of order size.

Which one of the following statements about inventory control systems is best?

A(n) ________ system is a visual system in which an item's inventory is stored at two different locations.

In an EOQ model, as the annual holding cost for an item increases, the EOQ for the item ________.

Scenario 9.4 The Mwongola Company is a small manufacturing company that uses gear assemblies to produce four different models of mountain bikes. One of these gear assemblies, the "Smooth Shifter", is used for the two most expensive of Burdell's four models, and has an estimated annual demand of 300 units. Burdell estimates the cost to place an order is $40, and the holding cost for each assembly is $60 per year. The company operates 250 days per year. -Use the information in Scenario 9.4. How many times per year must Mwongola order the Smooth Shifter when orders are placed using the EOQ quantity?

Which one of the following statements regarding the economic order quantity (EOQ) is True?

Scenario 9.10 The Dolly Llama Farm keeps an average of 50 of those funny creatures on hand and each consumes a pound of grain a day, 365 days per year. Grain costs $12 for a 50 pound bag and it costs the farm $10 to make a run to the feed store to pick up an order, regardless of order size. It takes the feed store four days to acquire, mix, and bag the special blend of grains necessary to make the feed the Dolly Llama Farm prefers. Storage costs for the feed runs 15% of the unit cost as the cost of money, loss due to critters, and spoilage all add up. -Refer to Scenario 9.10. The actual usage for grain depends on which llamas show up at feeding time, thus there is an average need for 50 pounds of grain each day with a standard deviation of five pounds. In addition, there is some variability in how long it takes the feed store to whip up a batch of llama feed. The standard deviation of the feed prep is one day. The farm is willing to tolerate a 2% chance of running out of feed before they can get some more hauled in. Which adjustment to their system would have the greatest impact on the reorder point?

Scenario 9.4 The Mwongola Company is a small manufacturing company that uses gear assemblies to produce four different models of mountain bikes. One of these gear assemblies, the "Smooth Shifter", is used for the two most expensive of Burdell's four models, and has an estimated annual demand of 300 units. Burdell estimates the cost to place an order is $40, and the holding cost for each assembly is $60 per year. The company operates 250 days per year. -Use the information in Scenario 9.4. What is the total annual holding and ordering costs if Mwongola orders using the EOQ quantity?

Scenario 9.5 Tom Bergman, owner and operator of the Earplug Superstore, is reviewing the costs associated with the store's best-selling hearing aid, the BZ15. The data available to Dr. Bergman concerning this device follow. Demand = 25 units/week Order cost = $3/order Holding cost = $1.50/unit/year The Earplug Superstore operates 52 weeks a year. -Use the information in Scenario 9.5. If Tom orders a one-year supply at a time, how much higher are his total (ordering and holding) costs compared to total costs incurred if he ordered at his EOQ?

Table 9.1 Inventory records show the following: -What is generally True about class C SKUs in ABC analysis? They represent about:

Table 9.1 Inventory records show the following: -What is generally True about class B SKUs in ABC analysis? They represent about:

You have taken a job in industry and are facing your first ordering decision. As you prepare to place the order, you remember your instructor teaching you that you would not use the EOQ formula if:

What are the secondary levers for cycle inventory?

________ consists of items such as components or assemblies needed for a final product in manufacturing.

A stock-keeping unit (SKU) is an individual item or product that has an identifying code and is held in inventory somewhere along the supply chain.

Which one of the following statements represents an advantage of a Q system over the P system?

EOQ should be used if you follow a make-to-stock strategy and the item has relatively stable demand.