Exam 11: Managing Inventory Throughout the Supply Chain

In a periodic review system,if the average demand increases by 100%,the restocking level is:

Inventory that is "in the pipeline" moving from one link to another is:

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

The ________ is an extreme change in the supply position upstream generated by a small change in demand downstream.

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

The bullwhip effect says that a small change in demand downstream in the supply chain causes a large change in demand upstream.

Companies do not plan to use safety stock.

A hospital's biomedical repair shop uses a 4-week periodic system to maintain the inventory on the blood pressure cuff repair parts.They use an average 40 adult arm cuffs with a standard deviation of 6 cuffs every 4 weeks.Cuffs aren't the most critical item they carry,but the manager would like to avoid the embarrassment of a stockout at least 95% of the time.What should their restocking level be?

The beef jerky driver shows up every Monday to take orders from his convenience store customers.One fine Monday morning he stops in the Quik-E Mart and notes that there are only three sticks on the shelves.Consulting his route sheet,he discovers that the restocking level is 40.The order quantity is therefore:

The factory produces product and ships it to the distributor.The distributor sends it to the wholesaler when they receive an order.The wholesaler ships the product to the retailer as the retailer requests replenishment.The customer visits the retailer's bricks and mortar store to purchase the product when they run out.Which of these supply chain members is most likely subjected to the greatest variability in customer demand?

A university orders all office supplies,including red grading pens,out of a catalog from the same supplier.Conservative estimates of the demand for these red pens are 12,000 pens per year.There is a $25 charge for placing an order and the university has a $10 annual cost for holding these pens.Prices for the pens are based on the quantity purchased,so if less than 100 are ordered,the unit price is $2.50,if 100 to 299 are ordered,the unit price is $2.40,if 300 to 499 are ordered,the unit price is $2.30,and if 500 or more are ordered,the unit price is $2.20.What order quantity will result in the lowest total annual cost to the university?

Central Perk orders their organic coffee filters from a South American supplier that mails them as inexpensively (hence,as slowly)as possible.Central Perk uses 80 filters a day with a standard deviation of 15 days.It would be disastrous if they ran out of these filters,years ago customers caught them using paper towels from the men's room and business suffered.They have set their service level at 99.5% in hopes of avoiding a similar situation.It takes a fortnight to receive a shipment and the standard deviation of the shipping time is five days.What is their reorder point?

A manufacturer replenishes their packaging materials according to the economic order quantity model.They use 25,000 cases of packaging materials per year and order 500 cases at a time.Their cost to carry a case in inventory for a year is $12.How much does it cost them to place an order with their supplier?

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

A company that orders at their economic order quantity has an annual ordering cost that is half of their total cost.

The campus bookstore sells 4,000 sets of graduation regalia each year.Placing an order from their supplier costs $25 regardless of order quantity,so they usually place a large order (a half year's supply)at a time.It costs $5 per year to hold a cap and gown in inventory,primarily insurance costs for the highly flammable material.What is the total cost if they order at their optimal order quantity?

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

Geoff hesitated as he read the fast food menu,unsure whether he should supersize his order of delicious golden French fries.Doing so would increase his cost from $0.99 to $1.59 and just might provide him the nutrition he needed to make it through the second half of his day at the office.Of course,if he finished his hamburger and the usual amount of fries,he would simply throw the extra ones away.However,if he failed to supersize his order,he would have to take a candy bar break mid-afternoon and they weren't exactly giving them away in the break room vending machines.He would likely need two candy bars,which sold for $0.95 each.What is Geoff's target service level?

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

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?