Exam 9: Inventory Management

The manager at Crystal Mountain Ski Resort lowers the price of lift tickets to $2 during July and August, a traditionally slow period for skiing. This secondary lever impacts:

The Hastings Company is a nation-wide wholesaler for small electronic devices. One of its most popular items is a new GPS unit called the WAMI-1,000. Hastings has gathered the following information, and has asked you to develop a continuous review inventory control system for this item: Order quantity for each order placed with manufacturer = 10,000 units Average demand = 1,000 units/week Standard deviation of weekly demand = 200 units Average lead time = 5 weeks Standard deviation of lead time: 1.5 weeks Cycle-service level = 90% (z for 90% = 1.28) a. What is the standard deviation of demand during lead time? b. What is the safety stock level that should be carried for the WAMI-1,000? c. What is the reorder point for the WAMI-1,000? d. Summarize the actions Hastings should take using your new inventory system. e. If Hastings decides to increase its cycle-service level from 90% to 95% (z for 95% = 1.65), how does this change the actions that should be taken?

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. -An item experiences an annual demand of 7,200 units. It costs $8 to hold an item in inventory for one year and $16 to place an order. If the EOQ model is used, what is the time between orders? Assume that there are 52 business weeks in a year.

The ________ is the measurement of an item's ability to satisfy future demand.

The two-bin inventory system is a type of visual system.

A(n) ________ is a system that allows employees to place orders when inventory visibly reaches a certain marker.

Which of the following does not generate pressure to decrease inventories?

A stockout occurs when an item that is typically stocked is not available to satisfy a demand the moment it occurs.

Scenario 9.11 Demand = 50,000 units/week Standard deviation of weekly demand = 15,000 units Average lead time = 8 weeks Standard deviation of lead time: 3 weeks Cycle-service level = 80% A continuous review system is used to control inventory. -Use the information in Scenario 9.11. What safety stock should the firm use for this product?

Scenario 9.7 Cranium, Inc., purchases term papers from an overseas supplier under a continuous review system. The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day. It costs $60 to process each order and there is a five-day lead-time. The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level. Cranium operates 200 days per year. -Use the information in Scenario 9.7. What is the standard deviation of demand throughout the five-day lead-time period?

Scenario 9.8 A company operating under a continuous review system has an average demand of 50 units per week for the item it produces. The standard deviation in weekly demand is 20 units. The lead-time for the item is six weeks, and it costs the company $30 to process each order. The holding cost for each unit is $10 per year. The company operates 52 weeks per year. -Use the information in Scenario 9.8. What is the reorder point if the company finally decides to implement a 95 percent cycle-service level?

A ________ is an incentive to order larger quantities, where the price per unit decreases when the order is sufficiently large.

The Hastings Company is a nation-wide wholesaler for small electronic devices. One of its most popular items is a new GPS unit called the WAMI-1,000. Hastings has gathered the following information, and has asked you to develop a continuous review inventory control system for this item: Order quantity for each order placed with manufacturer = 50,000 units Average demand = 5,000 units/week Standard deviation of weekly demand = 1,000 units Average lead time = 4 weeks Standard deviation of lead time: 1 week Cycle-service level = 90% (z for 90% = 1.28) a. What is the standard deviation of demand during lead time? b. What is the safety stock level that should be carried for the WAMI-1,000? c. What is the reorder point for the WAMI-1,000? d. Summarize the actions Hastings should take using your new inventory system. e. If Hastings decides to increase its cycle-service level to from 90% to 99% (z for 99% = 2.33), how does this change the actions that should be taken?

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

________ inventory is the surplus inventory that a company holds to protect against uncertainties in demand, lead-time, and supply.

Scenario 9.7 Cranium, Inc., purchases term papers from an overseas supplier under a continuous review system. The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day. It costs $60 to process each order and there is a five-day lead-time. The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level. Cranium operates 200 days per year. -Use the information in Scenario 9.7. What is the annual cost of holding the safety stock necessary to maintain the 98% service level?

Items sold to a firm's customers are called:

Scenario 9.3 The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year. -Use the information in Scenario 9.3. What is the annual ordering cost if Talbot orders using the EOQ quantity?

When considering dependent / independent demand, in the example of tires and automobiles, the original equipment tires represent ________-demand items, while automobiles represent a(n) ________-demand item.

Scenario 9.7 Cranium, Inc., purchases term papers from an overseas supplier under a continuous review system. The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day. It costs $60 to process each order and there is a five-day lead-time. The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level. Cranium operates 200 days per year. -Use the information in Scenario 9.7. What is the EOQ for these papers?