Exam 12: Managing Inventory Throughout the Supply Chain

A local barbecue joint makes one massive batch of potato salad each day.If they run out of this savory side before the end of the day,their last few customers are less than satisfied,but if they make too much,they sell it to the local hog farmer for feed.Every serving costs an equivalent of $0.23 to make,but can be sold for $1.50 to customers and for $0.08 to the hog farmer.The average daily demand is for 200 servings with a standard deviation of 20 servings.How many servings should be made each day?

Tickets for the gala Opening Night festivities in Oklahoma City are available for $80 in advance at a couple of area businesses.If you wait until you arrive at the venue,you will pay full face value of $100 per ticket to enjoy the same festivities.If you buy a ticket and don't use it,you can buy $25 worth of chemicals and treat the ticket so that it can be used the following year.You have been taking orders from your friends for a few years and historically demand has been normally distributed with a mean of 50 tickets and a standard deviation of 10.What's the best quantity of tickets to purchase for this year's event?

Which of the following relationships shows dependent demand inventory?

Individual links in the supply chain can stabilize their production at the most efficient level by using:

If demand increases by 100%,the average inventory held in a system governed by the EOQ model:

In a single period system,the target ________ is the balancing point between shortage costs and excess costs.

Derive the economic order quantity model,beginning with a definition of terms and graph of cost curves.

Describe any four types of inventory and the drivers that spur their need.

In order for the economic order quantity model to work,demand must be known and constant.

Which of these conditions is NOT necessary for the economic order quantity model to be valid?

Tata Motors assembles cars from their own parts and subassemblies and also controls the mining and fabrication of the materials used to create those parts.When Anand ordered their luxury sedan with the platinum dashboard he knew he wouldn't be taking delivery of his dream car the next week.Rather,he would be waiting a while thanks to:

Three Chums Fish Company buys fresh salmon daily from the fishermen that ply the deep waters of Puget Sound.Salmon are purchased for $2.50 per pound and sold to the public at $8.50 per pound.The salmon are kept fresh by displaying them on ice but at the end of the day,any unsold fish have a noticeable odor and are sold to a nearby chowder stand for $1 per pound.The past year's demand for salmon on Saturdays is shown in the table.Based on this information,what should their target service level and stocking point be? What is the significance of the target stocking level?

The cashier waved the can of golden hominy across the holographic bar code reader and it emitted a piercing beep.At the same time the customer's bill was rising,the grocery store's inventory was automatically being reduced by 1 can of golden hominy down to 3 cans.This was the bare minimum amount of hominy the store manager dared carry in inventory,so the computer system automatically sent a message to the hominy man,who loaded a few cases onto his delivery truck for tomorrow morning's trip to replenish the store.This is a classic example of:

Safety stock increases when:

Cycle stock can occur at more than one point in a supply chain.

Nothing is too good for my cats,so all their food is custom made at Catastic,who operates a specialty organic food mill in an adjacent state.We need 500 pounds of food per year,distributed evenly throughout the year.It costs $20 shipping and handling to place and receive an order for this delicious food.The cats are fed only on week days,so the 500 pounds per year translates to 2 pounds per day (we go out to restaurants on the weekends).Of course,my cats don't always eat exactly 2 pounds per day,their demand could more precisely be described as an average of 2 pounds and a standard deviation of 0.3 pounds per day.It takes ten days on average to receive an order for food once I place it.It costs $35 to hold a pound of food in inventory for a year and the food costs $850 per pound.It's expensive,yes,but again,nothing is too good for my cats. -What amount should I order and when should I order it if I want only a 1% chance of running out of food for my babies?

As the average demand rises,the standard deviation of demand falls.

Inventory items with demand levels that are beyond an organization's complete control are termed ________.

A company using the basic EOQ model has annual ________ costs equal to annual ________ costs.

A catfish bait manufacturer uses a secret blend of ingredients to make their infamous bait.One of these ingredients,we'll call it X for proprietary reasons,is the major component in the mixture.X is ordered in 55 gallon barrels from out of state and is used at the rate of 800 barrels per year.Each order that is placed with the supplier costs $45 to process.Storage space is at a premium on the manufacturing floor and out in the yard,so their annual cost to hold inventory is $80 per barrel.The owner's brother-in-law provides transportation services and his record has been less than stellar,so lead time has averaged 6 days with a standard deviation of 3.Stopping the process would be disastrous,so the plant manager has set a 99% service level on the reorder point. What is the best order quantity? What is the total cost at this reorder point? What is the reorder point? What is the cost of holding this safety stock?