Exam 13: Inventory Management

Pointe au Chien Containers,Inc.,manufactures in batches,and the manufactured items are placed in stock.Specifically,the firm is questioning how best to manage a specific wooden crate for shipping live seafood,which is sold primarily by the mail/phone order marketing division of the firm.The firm has estimated that carrying cost is $4 per unit per year.In addition,annual demand = 60,000 units,and setup cost is $300.The firm currently plans to satisfy all customer demand from stock on hand.Demand is known and constant.The production rate is nearly instantaneous. a.What is the cost minimizing size of the manufacturing batch? b.What is the total annual holding and setup cost of this solution?

The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers.Mean demand during lead time is 170 trimmers,and the standard deviation during lead time is 60 trimmers.The annual cost of carrying one trimmer in inventory is $6.The area sales people have recently told Winfield's management that they could expect a $400 improvement in profit (based on current figures of cost per trimmer)if the service level were increased to 99%.Is it worthwhile for Winfield to make this change?

Demand for a product is relatively constant at five units per day.Lead time for this product is normally distributed with a mean of ten days and a standard deviation of three days. (a)What reorder point provides a 50 percent service level? (b)What reorder point provides a 90 percent service level? (c)If the lead time standard deviation can be reduced from 3 days to 1,what reorder point now provides 90 percent service? How much is safety stock reduced by this change?

In a quantity discount problem,if the savings in annual product cost is smaller than the increase in the sum of annual setup cost and annual holding cost,the discount should be ________.

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

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

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

Which of the following statements about ABC analysis is FALSE?

Central University uses $123,000 of a particular toner cartridge for laser printers in the student computer labs each year.The purchasing director of the university estimates the ordering cost at $45 and thinks that the university can hold this type of inventory at an annual storage cost of 22% of the purchase price.How many months' supply should the purchasing director order at one time to minimize the total annual cost of purchasing and carrying?

The fixed-period inventory model can have a stockout during the review period as well as during the lead time,which is why fixed-period systems require more safety stock than fixed-quantity systems.

________ is the time between placement and receipt of an order.

If daily demand is normally distributed with a mean of 15 and standard deviation of 5,and lead time is constant at 4 days,a 90 percent service level will require how much safety stock?

Perform an ABC analysis on the following set of products.

A product has a reorder point of 260 units,and is ordered ten times a year on average.The following table shows the historical distribution of demand values observed during lead time. Currently,stockouts are valued at $5 per unit per occurrence,while inventory carrying costs are $2 per unit per year.Should the firm add safety stock? If so,how much safety stock should be added?

According to the global company profile,Amazon.com's advantage in inventory management comes from its almost fanatical use of economic order quantity and safety stock calculations.

Identify the typical components that constitute inventory holding or carrying costs.

The proper quantity of safety stock is typically determined by:

A bakery wants to determine how many trays of doughnuts it should prepare each day.Demand is normal with a mean of 5 trays and standard deviation of 1 tray.If the owner wants a service level of at least 95%,how many trays should he prepare (rounded to the nearest whole tray)? Assume doughnuts have no salvage value after the day is complete.

How sensitive is the EOQ to variations in demand or costs?

Which of the following statements regarding Amazon.com is FALSE?