Exam 6: A: Quality Improvement Tools

Bill's Food Emporium uses the periodic system to order cans of Cajun seasoning every 30 days.It typically takes the supplier 10 days to resupply Bill.Sales average eight units per day with a standard deviation of two units per day.Bill does not carry any safety stock of Cajun seasoning.If he runs out for a period of time,he doesn't care.Bill just counted his inventory of Cajun seasoning and found 22 cans on the shelf.How many cans should Bill order?

Jay's Café orders cans of beans every two weeks.It typically takes the supplier two days to fulfill the order.Jay uses five cans per day on average,with a standard deviation of two units per day.Assume that Jay wants to have a 50 percent service level on the availability of beans.There are currently fifteen cans of beans in Jay's inventory.How many cans should Jay order?

Which of the following is NOT often associated with supplier-managed inventory (SMI)arrangements?

A batch of Raisin Bran that has been made at Kellogg's but not yet packaged in its final cereal box would be an example of what type of inventory?

You have a one-time opportunity to buy an item.It costs $50 and sells for $100.It's disposal value equals its salvage value.What is the target service level?

HighLife Corporation has the following information: Average demand = 30 units per day Average lead time = 40 days Item unit cost = $45 for orders of less than 400 units Item unit cost = $40 for orders of 400 units or more Ordering cost = $50 Inventory carrying cost = 15 percent The business year is 300 days. Standard deviation of demand during lead time = 90 Desired service level = 95 percent What is the safety stock that HighLife Corporation should carry for its desired service level of 95 percent? 1)28 standard deviations cover 90 percent 1)65 standard deviations cover 95 percent 1)96 standard deviations cover 97.5 percent

When calculating a reorder point (ROP),which of the following factors WOULD NOT affect the calculation?

Texas Manufacturing has decided to triple the number of distribution centers it operates around North America in order to locate inventories within 500 miles of each major city.What effects should they expect?

Alpha Company places 10 orders per year with its supplier.Each order is for an amount exactly equal to the EOQ.Alpha has determined its annual inventory carrying cost is $2,000.Alpha carries no safety stock at all.What is Alpha's order cost per order?

Blue Star Co.has been using the production order quantity inventory model.If annual demand,daily demand,and the production rate increase to four times their original amounts,which of the following is/a possible consequence?

General Hospital uses disposable diapers at a rate of 200 per day,with a standard deviation of 20.To place and receive a replenishment of diapers from the third-party logistics provider typically takes three days.The hospital never wants to run out of diapers,so it holds enough safety stock to ensure 99.9 percent availability.Hospital purchasing managers order diapers along with other items every 30 days.It is time to place an order,and there are 800 diapers on hand.How many units should be ordered? (Pick the closest answer.)

A retail store's average sales are $100,000 per week.On average it holds $500,000 worth of inventory valued at cost to the retailer.The retailer's average pricing includes a mark-up of 30 percent.The retailer's annual inventory turnover is:

A difference between periodic review and continuous review inventory systems is:

Suppose you are positioning "meals ready to eat" (MREs)for humanitarian aid in an area prone to experiencing hurricanes.If a hurricane occurs,the number of MREs that might be demanded by affected residents of the area is normally distributed with a mean of 10,000 and a standard deviation of 500.MREs cost $1 each to purchase and store.In the event of a hurricane,unused MREs are unlikely to be needed again before they spoil,in which case they must be disposed of at a cost of $0.25 per MRE.If during a hurricane there are not enough stored MREs to meet people's needs,then more MREs can be purchased and quickly shipped in to the site at a cost of $8 each.How many MREs should you preposition in anticipation of a hurricane? (Pick the number closest to the correct answer.)

When small changes generated by a customer produce progressively larger changes at each stage upstream in the supply chain,this is known as:

John Jones of Jones Corporation determined that the cost related to processing an invoice from a supplier was approximately $100 per invoice.This cost is an example of:

A company has average demand of 30 units per day.Lead time from the supplier averages seven days.Assume that the combined standard deviation of demand during lead time has been calculated and is equal to 20 units.One unit costs $10 and the inventory carrying cost is 25 percent. 1 standard deviation covers 84.13% 1)04 standard deviations covers 85% 1)28 standard deviations covers 90% 1)65 standard deviations covers 95% 1)96 standard deviations covers 97.5% 2 standard deviations covers 97.72% 2)33 standard deviations covers 99% 3 standard deviations covers 99.86% 6 standard deviations covers 99.99966% Suppose management decides it wants to offer a 95 percent service level.That is,it is willing to experience a stockout probability of 5 percent during the order cycle.What is the annual cost of this safety stock policy?

Steve's shop sells seashells by the seashore.Steve buys shells from local collectors for an average price of $0.50 per shell.Steve sells on average 1,000 shells each month.Each time he orders shells from collectors,there is a $20 shipping and handling fee.Steve estimates a unit holding cost of $0.50 per shell per year (many of them get broken if held in inventory too long).How often should Steve order seashells?

What might a company do to reduce the amount of cycle stock it holds?

Safety stock exists for which of the following reasons?