Exam 13: Inventory Management

Decoupling operations applies to the railroad industry.

A retail store that carries twice as much inventory as its competitor will provide twice the customer service level.

Even though it is often the case that no cash outflows result when demand exceeds capacity, __________ can nevertheless be experienced in those circumstances.

The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. If order size was 1,000 kilograms of resin, what would be the length of an order cycle?

A shop that makes candles offers a scented candle, which has a monthly demand of 360 boxes. Candles can be produced at a rate of 36 boxes per day. The shop operates 20 days a month. Assume that demand is uniform throughout the month. Setup cost is $60 for a run, and holding cost is $2 per box on a monthly basis. Determine the following: (A) the economic run size (B) the maximum inventory (C) the number of days in a run The daily usage rate (u) is 18 boxes. The daily production rate (p) is 36 boxes.

Reorder point models are primarily used for dependent-demand items.

An operations strategy which recognizes high carrying costs and reduces ordering costs will result in:

To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: the timing and the size of orders.

If average demand for an item is 20 units per day, safety stock is 50 units, and lead time is four days, the ROP will be:

In the single-period model, if excess cost is double the shortage cost, the approximate stockout risk, assuming an optimum service level, is ___ percent.

The objective of inventory management is to minimize the cost of holding inventory.

A car rental agency uses 96 boxes of staples a year. The boxes cost $4 each. It costs $10 to order staples, and carrying costs are $.80 per box on an annual basis. Determine: (A) the order quantity that will minimize the sum of ordering and holding boxes of staples (B) the annual cost of ordering and carrying the boxes of staples D = 96 boxes/year S = $10 H = $.80 per box-year

One important use of inventories in manufacturing is to decouple operations through the use of work-in-process inventories.

Which of these products would be most apt to involve the use of a single-period model?

Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. If she were to order 80 pounds of pepperoni at a time, what would be the total daily costs, including the cost of the pepperoni?

In the A-B-C approach, C items typically represent about 15 percent of the number of items, but 60 percent of the dollar usage.

The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.

When the item is offered for resale, shortage costs in the single-period model can include a charge for loss of customer goodwill.

DVD recorders would be an example of independent-demand items.

Given the following data for a particular inventory item: Usage 500 units/week Ordering \ 40 per order Carrying Cost \ .01 per unit per week Lead Time 3 weeks Price \ .50 per unit For the economic order quantity, what are average weekly carrying costs?