Exam 9: Supply Chain Inventory Management

Which of the following does not increase repeatability?

Reducing setup costs will increase the pressure to keep larger inventories.

The Lemma Company manufactures and sells 10 products.Ways have been found to cut both the setup and inventory holding costs in half.What effect will this have on the economic order quantities of the 10 products?

In an EOQ model,as the annual demand for an item increases,the EOQ for the item ________.

Which one of the following statements is best?

A stock-keeping unit (SKU)is a specially designed container for holding a specific amount of an inventory item somewhere along the supply chain.

Scenario 9.5 Cranium,Inc. ,purchases term papers from an overseas supplier under a continuous review system.The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day.It costs $60 to process each order and there is a five-day lead-time.The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level.Cranium operates 200 days per year.A normal distribution table is appended to this exam. -Use the information in Scenario 9.5.What is the reorder point R to satisfy a 98% cycle-service level?

The ________ is the average elapsed time between receiving replenishment orders of Q units for a particular lot size.

Items,such as components or assemblies,needed to manufacture a final product are called:

A continuous review system is sometimes called a reorder point system.

A ________ is an incentive to order larger quantities,where the price per unit is decreased when the order is sufficiently large.

A(n)________ occurs when a customer order cannot be filled as promised or demanded but is filled later.

In an EOQ model,as the ordering cost for an item decreases,the EOQ for the item ________.

The Hastings Company is a nation-wide wholesaler for small electronic devices.One of its most popular items is a new GPS unit called the WAMI-1000.Hastings has gathered the following information,and has asked you to develop a continuous review inventory control system for this item: Order quantity for each order placed with manufacturer = 10,000 units Average demand = 1,000 units/week Standard deviation of weekly demand = 200 units Average lead time = 5 weeks Standard deviation of lead time: 1.5 weeks Cycle-service level = 90% (z for 90% = 1.28)a.What is the standard deviation of demand during lead time? b.What is the safety stock level that should be carried for the WAMI-1000? c.What is the reorder point for the WAMI-1000? d.Summarize the actions Hastings should take using your new inventory system. e.If Hastings decides to increase its cycle-service level to from 90% to 95% ( z for 95% = 1.65),how does this change the actions that should take?

Scenario 9.9 Demand = 5,200 units/year Standard deviation of weekly demand = 11 units Ordering costs = $45/order Holding costs = $2/unit/year Cycle-service level = 90% (z for 90% = 1.28) Lead-time = 3 weeks Number of weeks per year = 52 weeks -Use the information in Scenario 9.9.The firm decided to change to the periodic review system to control the item's inventory.For the most recent review,an inventory clerk checked the inventory of this item and found 500 units.There were no scheduled receipts at the time.How many units should be ordered? (HINT: Use the EOQ model to derive P,the time between reviews. )

A company operating under an EOQ policy enjoys rising annual demand for their products for three consecutive years.During this time their holding cost and ordering cost remain constant.Which statement is best?

A store has collected the following information on one of its products: Demand = 4,500 units/year Standard deviation of weekly demand = 12 units Ordering costs = $40/order Holding costs = $3/unit/year Cycle-service level = 90% (z for 90% = 1.28)Lead-time = 2 weeks Number of weeks per year = 52 weeks a.If a firm uses the continuous review system to control the inventory,what would be the order quantity and reorder point? b.The firm decided to change to the periodic review system to control the item's inventory.For the most recent review,an inventory clerk checked the inventory of this item and found 300 units.There were no scheduled receipts or backorders at the time.How many units should be ordered? (HINT: Use the EOQ model to derive P,the time between reviews. )

Scenario 9.4 Consider the following data for an independent-demand item maintained by Vicki Crittenden,the proprietor of a local auto repair shop: Weekly demand = 50 units Ordering cost = $8/order Holding cost = $4/unit/year Weeks in a year = 50 -Use the information in Scenario 9.4.If Crittenden uses the EOQ model,how frequently must she place orders for this item?

Which one of the following is not an assumption of the EOQ model?

Scenario 9.7 You are the operations manager of a firm that uses the continuous-review inventory control system.Suppose the firm operates 52 weeks a year,365 days,and has the following characteristics for its primary item: Demand = 25,000 units/year Ordering cost = $30/order Holding cost = $8/unit/year Lead time = 2 weeks Standard deviation in weekly demand = 100 units A normal distribution table is appended to this exam. -Use the information in Scenario 9.7.If this firm uses an EOQ model for purchase decisions,which change would result in the biggest increase in order quantity over the order quantity determined with the original data?