Exam 9: Supply Chain Inventory Management

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.Which of the following situations results in the wholesaler's total cycle plus pipeline inventories amounting to 550 units?

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.The purchasing manager decides that,in order to save purchasing time,orders for the Smooth Shifter will be placed once a month,or twelve times per year.How much does this approach cost Burdell in additional annual holding and ordering costs (instead of Burdell ordering using the EOQ quantity)?

Scenario 9.11 The Hastings Company is a nation-wide wholesaler for small electronic devices.One of its most popular items is a calculator,the "Whizz-Bang 1100".Hastings's demand,lead time and cycle service requirements for the W-B 1100 are as follows: Demand = 25,000 units/year Number of weeks per year = 50 weeks Standard deviation of weekly demand = 100 units Average lead time = 6 weeks Standard deviation of lead time: 2 weeks Cycle-service level = 85% Hastings uses a continuous review system to control inventory. A normal distribution table is appended to this exam. -Use the information in Scenario 9.11.What is the standard deviation of demand during lead time?

As safety stock increases,the holding cost of that inventory item ________.

What assumptions are made in calculating the economic order quantity? Which of these assumptions is the least realistic? Why?

Which one of the following descriptions best defines the cycle-service level as a measure of customer service?

What production strategies should not employ an EOQ approach to ordering? Why?

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 annual ordering costs if Burdell orders using the EOQ quantity?

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 safety stock should the firm use for this product?

What are the secondary levers for safety stock inventory?

Cynthia Korinsky,manager of a large medical supply house that operates 50 weeks per year and five days per week,has decided to implement a periodic review system for all class A SKUs.One such SKU has the following characteristics: Demand = 10,000 units per year (or 40 units per workday)Order cost = $50 per order Holding cost = $5 per unit per year If Korinsky wishes to minimize total cost (thereby approximating the EOQ),the number of workdays between orders (or P),should be:

Items sold to a firm's customers are called:

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.What safety stock level provides a 95% cycle-service level?

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.What is the total cost (ordering and carrying)if the company orders the economic order quantity for this item?

One of the secondary levers for reducing pipeline inventory is to:

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 is the cycle length (time between orders)when orders are placed using the EOQ quantity?

The ________ is the measurement of an item's ability to satisfy future demand.

ABC analysis is closely related to:

A periodic review/reorder system is also known as a(n))________ system.

A Theory of Constraints (TOC)advocate visits your factory and seems bemused by your use of EOQ to set your batch sizes.You launch into a brilliant defense of the EOQ.The TOC advocate grabs a piece of chalk and proceeds to sketch two sets of inventory cost curves on your pristine shop floor.What will his two different sets of cost curves look like and why?