Exam 9: Supply Chain Inventory Management

A store has collected the following information on one of its products: Demand = 10,000 units/year Standard deviation of weekly demand = 25 units Ordering costs = $30/order Holding costs = $4/unit/year Cycle-service level = 95% (z for 95% = 1.65)Lead-time = 2 weeks Number of weeks per year = 50 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 200 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 9.2 The Burdell Company is a small manufacturing company that uses gear assemblies to produce four different models of mountain bikes.One of these gear assemblies,the "Smooth Shifter",is used for the two most expensive of Burdell's four models,and has an estimated annual demand of 300 units.Burdell estimates the cost to place an order is $40,and the holding cost for each assembly is $60 per year.The company operates 250 days per year. -Use the information in Scenario 9.2.What are the total annual holding and ordering costs if Burdell orders using the EOQ quantity?

________ is the cost of preparing a purchase order for a supplier or a production order for the shop.

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 ordering costs if Talbot orders using the EOQ quantity?

________ inventory is the inventory moving from point to point in the materials flow system.

In an ABC analysis,the class ________ SKUs,which typically make up about ________ % of the SKUs,account for about 80% of the dollar usage.

Scenario 9.12 Demand = 50,000 units/week Standard deviation of weekly demand = 15,000 units Average lead time = 8 weeks Standard deviation of lead time: 3 weeks Cycle-service level = 80% A continuous review system is used to control inventory. A normal distribution table is appended to this exam. -Use the information in Scenario 9.12.What safety stock should the firm use for this product?

Which one of the following statements about inventory control systems is true?

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 at the economic order quantity,how many units does he order at a time?

Which one of the following statements concerning the economic order quantity (EOQ)is TRUE?

EOQ should be used if you use a make-to-order strategy and the customer specifies the entire order be delivered in one shipment.

Scenario 9.8 Peterson Enterprises uses a continuous review inventory control system.The firm operates 50 weeks per year and has the following characteristics for an item: Demand = 50,000 units/year Ordering cost = $35/order Holding cost = $2/unit/year Lead-time = 3 weeks Standard deviation in weekly demand = 125 units A normal distribution table is appended to this exam. -Use the information in Scenario 9.8.What is the EOQ for this item?

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 standard deviation of demand throughout the five-day lead-time period?

When using ABC analysis,class C SKUs should be reviewed frequently.

A(n)________ is a system that allows employees to place orders when inventory visibly reaches a certain marker.

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 service level does a reorder point of 1,524 imply?

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

When considering dependent / independent demand,in the example of tires and automobiles,the original equipment tires represent ________-demand items,while automobiles s represent a(n)________-demand item.

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 is the standard deviation of demand during lead time?

Scenario 9.6 A company operating under a continuous review system has an average demand of 50 units per week for the item it produces.The standard deviation in weekly demand is 20 units.The lead-time for the item is six weeks,and it costs the company $30 to process each order.The holding cost for each unit is $10 per year.The company operates 52 weeks per year.A normal distribution table is appended to this exam. -Use the information in Scenario 9.6.What is the reorder point if the company finally decides to implement a 95 percent cycle-service level?