Exam 9: Inventory Management

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

Repeatability is an undesirable feature of some orders because they must be repeated until the order is filled correctly.

Scenario 9.5 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 Dr.Bergman concerning this device follow. Demand = 25 units/week Order cost = $3/order Holding cost = $1.50/unit/year The Earplug Superstore operates 52 weeks a year. -Use the information in Scenario 9.5.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?

Scenario 9.11 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 9.11.What is the standard deviation of demand during lead time?

What are the key issues when implementing and operating an inventory control system?

Scenario 9.1 Shipments of Product A from a distribution center to a retailer are made in lots of 350.The retailer's average demand for Product A is 75 units per week.The lead time from distributor to retailer is 3 weeks.The retailer pays for the shipments when they leave the distributor.The distributor has agreed to reduce the lead time to 2 weeks if the retailer will purchase quantities of 400 per shipment instead of 350 units per shipment. -Refer to Scenario 9.1.With the change in purchased quantities,the average cycle inventory will:

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

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

Jimmy's Egg is a specialty restaurant featuring 47 different kinds of omelettes in three different sizes.They use 60 dozen eggs a day that they order from an egg factory with a lead time of five days.One fine day they stock their chiller and note that there are only 25 dozen eggs remaining.They have a backorder of 15 cases and an open order of 200 cases.What is their inventory position? Should they place an order?

What is generally TRUE about class A SKUs in ABC analysis? They represent about:

The medical staff on Shudder Island uses an average of 60 vials of thorazine every day.This demand is normally distributed with a standard deviation of 15 vials.Since this is an important item,they have decided on a 98% service level.Ferries run infrequently,so the lead time for delivery is 12 days on average with a standard deviation of 2 days.Lead time is also normally distributed. a.What is the expected demand during lead time? b.What is the standard deviation of demand during lead time? c.What is the average safety stock? d.What is the reorder point? e.If the company desired to lower the reorder point,which of these initiatives would lower it by the greatest amount - reducing the lead time by 10%,reducing the standard deviation of lead time by 10%,or reducing the service level by 10%?

A periodic review system is a system in which an item's inventory position is reviewed periodically rather than continuously.

Scenario 9.10 The Dolly Llama Farm keeps an average of 50 of those funny creatures on hand and each consumes a pound of grain a day,365 days per year.Grain costs $12 for a 50 pound bag and it costs the farm $10 to make a run to the feed store to pick up an order,regardless of order size.It takes the feed store four days to acquire,mix,and bag the special blend of grains necessary to make the feed the Dolly Llama Farm prefers.Storage costs for the feed runs 15% of the unit cost as the cost of money,loss due to critters,and spoilage all add up. -Refer to Scenario 9.10.The actual usage for grain depends on which llamas show up at feeding time,thus there is an average need for 50 pounds of grain each day with a standard deviation of five pounds.In addition,there is some variability in how long it takes the feed store to whip up a batch of llama feed.The standard deviation of the feed prep is one day.The farm is willing to tolerate a 2% chance of running out of feed before they can get some more hauled in.Which adjustment to their system would have the greatest impact on the reorder point?

Compare and contrast the Q and P systems of inventory control.

Consider the following conditions for an item used in the Hess Company's manufacturing process: Which of the following statements best describes Hess's situation regarding inventory replenishment?

Scenario 9.8 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 9.8.What is the desired safety stock level if the company has a policy of maintaining a 90% cycle-service level?

A mom and pop gas station near a remote lake popular with anglers is more likely to use a periodic review system than a chain of department stores.

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

Which of the following generates pressure to decrease inventories?

A(n)________ system is a system designed to track the remaining inventory of an item each time a withdrawal is made to determine whether to replenish the item.