Exam 9: Supply Chain Inventory Management

Scenario 9.13 Demand = 100,000 units/year Number of days per year = 250 weeks Standard deviation of weekly demand = 50 units Average lead time = 5 days Standard deviation of lead time: 2 days Cycle-service level = 99% A continuous review system is used to control inventory. A normal distribution table is appended to this exam. -Use the information in Scenario 9.13.What reorder point should the firm use for this product?

What is generally true about the class C SKUs in ABC analysis? They represent about:

A stockout occurs when an item that is typically stocked is not available to satisfy a demand the moment it occurs.

When looking at inventory management,the term "lot size" refers to the quantity of an inventory item management either buys from a supplier or manufactures using internal processes.

Use the following to answer the questions below. Shipments of Product X from a plant to a wholesaler are made in lots of 600.The wholesaler's average demand for X is 100 units per week.Lead time from plant to wholesaler is 4 weeks.The wholesaler pays for the shipments when they leave the plant. -Refer to the instruction above.If the plant reduces its shipment lot size from 600 to 400 units and keeps its 4 week lead time,what is the wholesaler's new total cycle plus pipeline inventories?

Scenario 9.3 Tom Bergman,owner and operator of the Earplug Superstore,is reviewing the costs associated with the store's best-selling hearing aid,the BZ15.The data available to Mr.Bergman concerning this device follow. Demand = 25 units/week Order cost = $3/order Holding cos = $1.50/unit/year The Earplug Superstore operates 52 weeks a year. -Use the information in Scenario 9.3.If Tom orders a one-year supply at a time,how much higher are his total (ordering and holding)costs compared to total costs incurred if he ordered at his EOQ?

What is generally true about the class C SKUs in ABC analysis? They represent about:

What are the three types of inventory? For which one is a stockout most critical?

Scenario 9.13 Demand = 100,000 units/year Number of days per year = 250 weeks Standard deviation of weekly demand = 50 units Average lead time = 5 days Standard deviation of lead time: 2 days Cycle-service level = 99% A continuous review system is used to control inventory. A normal distribution table is appended to this exam. -Use the information in Scenario 9.13.If the firm decides to reduce its cycle-service level to 95%,what is the new reorder point if all other parameters remain the same for this product?

Considering the EOQ model,a reduction in ordering costs justifies reducing the lot sizes ordered.

If on-hand inventory = 100 units,scheduled receipts = 100 units and backorders = 100 units,the Inventory Position (IP)is 100 units.

________ are the basics tactics for reducing inventories in supply chains.

Scenario 9.1 The Talbot Company uses electrical assemblies to produce an array of small appliances.One of its high cost / high volume assemblies,the XO-01,has an estimated annual demand of 8,000 units.Talbot estimates the cost to place an order is $50,and the holding cost for each assembly is $20 per year.The company operates 250 days per year. -Use the information in Scenario 9.1.What are the annual inventory holding costs if Talbot orders using the EOQ quantity?

A quantity discount is attractive because there is a drop in the price per unit when the order is sufficiently large.

________ is the opportunity cost of investing in an asset relative to the expected return on assets of similar risk.

You have taken a job in industry and are facing your first ordering decision.As you prepare to place the order,you remember your instructor teaching you that you wouldn't use the EOQ formula if:

Independent-demand items are those items for which demand is influenced by market conditions and is not related to inventory decisions for any other items held in stock.

An item experiences an annual demand of 7,200 units.It costs $8 to hold an item in inventory for one year and $16 to place an order.If the EOQ model is used,what is the time between orders? Assume that there are 52 business weeks in a year.

________ inventory is the surplus inventory that a company holds to protect against uncertainties in demand,lead-time,and supply.

A stock-keeping unit (SKU)is an individual item or product that has an identifying code and is held in inventory somewhere along the supply chain.