Exam 11: Inventory Management

Suzy Jones is trying to decide whether to use one or two suppliers for the motors than go into the chain saws that her company produces. She wants to use local suppliers because her firm runs a JIT operation. Her factory is located in a coastal town that is prone to hurricanes. She estimates that the probability in any year of a "super-event" that might shut down all suppliers at the same time for at least two weeks is 5%. Such a total shutdown would cost the company approximately $100,000. She estimates the "unique-event" risk for any of the suppliers to be 8%. Assuming that the marginal cost of managing an additional supplier is $6,000 per year, should Suzy use one or two suppliers?

The fixed-period model requires a perpetual inventory system.

The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 20 and the daily production rate is 100. What is the production order quantity for this problem?

Which of the following statements regarding control of service inventories is TRUE?

An inventory decision rule states, "When the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is TRUE?

Variations in setup costs, holding costs, and demand usually make relatively modest differences in total cost because the EOQ model is robust.

Which of the following items is mostly likely managed using a single-period order model?

If setup costs are reduced by substantial reductions in setup time, the production order quantity is also reduced.

A bullwhip measure value can be negative.

An industrial producer is searching for a supplier for ball bearings. Its three most important supplier criteria are price, quality, and delivery reliability. The firm has decided that price and delivery reliability should carry the same weight, and that each of them are twice as important as quality. If the weights sum to 100%, what would a supplier with ratings of 40, 90, and 75 in the three respective categories score as a weighted total?

The primary trade-off in warehouse storage location analysis involves evaluating the number of trips taken for an item vs. the ________.

What happens to the cost of safety stock when the service level increases?

What value of the bullwhip measure would indicate that a dampening scenario exists?

ABC analysis is based upon the principle that:

Which of the following elements of the factor weighting technique in supplier selection analysis does NOT contain a certain degree of subjectivity?

A printing company estimates that it will require 10,000 reams of a certain type of paper in a given period. The cost of carrying one unit in inventory for that period is $1.50. The company buys the paper from a wholesaler in the same town, sending its own truck to pick up the orders at a fixed cost of $50.00 per trip. Treating this cost as the order cost, (a) what is the optimum number of reams to buy at one time? (b) How many times should lots of this size be bought during this period? (c) What is the minimum cost (holding and setup) of maintaining inventory on this item for the period? (d) Of this total cost, how much is carrying cost and how much is ordering cost?

Compare the assumptions of the production order quantity model to those of the basic EOQ model.

To use the fixed-period system, inventory must be continuously monitored.

Which of the following statements is TRUE regarding the 2011 Thoku earthquake and tsunami?

Describe ABC inventory analysis in one sentence. Identify three policies that may be based upon the results of an ABC analysis.