Exam 11: Inventory Management

In ABC analysis, "A" items are the least tightly controlled.

In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will:

The ________ model adds objectivity to decision making when selecting suppliers.

Identify the four primary causes of the bullwhip effect and the remedy for each.

Which of the following statements regarding work-in-process (WIP) inventory is FALSE?

The items listed below are stored in a one-dock warehouse. In what order should they be placed in the warehouse (moving from closest to the dock to furthest away from the dock)?

Milk is stocked at the grocery store each week. At the end of the week unsold milk is reduced in price by 50% and always sells for this lower price instantly. If weekly demand for milk is normally distributed with a mean of 200 gallons and standard deviation of 25 gallons, find the price for which a fresh gallon of milk sells. Assume a service level of 90% and that the store purchases milk for $3 per gallon.

A(n) ________ model gives satisfactory answers even with substantial variations in its parameters.

In a safety stock problem where both demand and lead time are variable, demand averages 200 units per day with a daily variance of 64, and lead time averages 6 days with a standard deviation of 1 day. How much safety stock is required for a 95% service level?

The bullwhip effect can occur when orders decrease as well as when they increase.

In a reorder point problem where both demand and lead time are variable, demand averages 200 units per day with a daily variance of 64, and lead time averages 6 days with a standard deviation of 1 day. What should the reorder point be for a 95% service level?

The annual demand, ordering cost, and the annual inventory carrying cost rate for a certain item are D = 600 units, S = $20/order and I = 30% of item price. Price is established by the following quantity discount schedule. What should the order quantity be in order to minimize the total annual cost?

Consider the disaster risk decision tree model. (a) Derive a formula to represent the amount that the probability of all suppliers being disrupted simultaneously, P(n), will increase if the super-event probability S is doubled. (b) Test your formula by computing the amount of increase if the original S equals 2% and there are two suppliers, each with U = 5%.

The factor weighting model is an attempt to add subjectivity to decision making when selecting among suppliers.

A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost ________ per year in total annual inventory (holding and setup) costs.

The overarching solution to the bullwhip effect is simply for supply chain members to share information and work together.

Which of the following statements regarding the production order quantity model is TRUE?

A firm that makes electronic circuits has been ordering a certain raw material 250 ounces at a time. The firm estimates that carrying cost is I = 30% per year, and that ordering cost is about $20 per order. The current price of the ingredient is $200 per ounce. The assumptions of the basic EOQ model are thought to apply. For what value of annual demand is their action optimal?

Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be?

The proper quantity of safety stock is typically determined by: