Exam 20: Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

The major binding constraint in an organization is defined as the drummer, which sets the production rate for the whole plant.

The correct order for the four steps that must be followed to solve problems graphically is

Theory of constraints focuses on what three operation measures of system performance?

A withdrawal Kanban specifies

Throughput is the rate at which an organization generates money through sales.

JIT reduces lead times to meet delivery dates by

The following information is available for Woodside Furniture Company, which sells two products: There are 200 hours available in the plant and 200 square feet of metal available per operating period. What is the objective function for maximizing sales?

Harrisburg Company uses quantitative models for inventory control. For canned syrup, the annual demand is 9,000 cases. The supplier is 500 miles away, and it usually takes 4 days to get an order filled. The average order costs $18 to process and the carrying cost per case is $42 per year. The store is open 300 days a year. Required: a. Determine the economic order quantity. b. Determine the reorder point if a safety stock of 24 cases is desired.

With JIT manufacturing, finished goods inventories are

When only one binding constraint exists, the product with the smallest contribution margin will be focused on.

The shadow price

The following reasons have been offered for holding inventories: 1. To balance ordering or setup costs and carrying costs. 2. To satisfy customer demand (e.g., meet delivery dates). 3. To avoid shutting down manufacturing facilities because of (a) machine failure. (b) defective parts. (c) unavailable parts. 4. Unreliable production processes. 5. To take advantage of discounts. 6. To hedge against future price increases. Required: a. Explain how the JIT approach responds to each of these reasons and, consequently, argues for insignificant levels of inventories. b. The theory of constraints (TOC) criticizes the JIT approach to inventory management, arguing that it fails to protect throughput. Explain what this means and describe how TOC addresses this issue.

Loose constraints are best defined as

One of the traditional reasons for holding inventory is to take advantage of quantity discounts and hedge against future price increases. The JIT solution is to

Hasselblad Company manufactures two different products, X and Y. The company has 100 pounds of materials and 300 direct labor hours available for production. The time requirements and contribution margins per unit are as follows: What is the objective function for maximizing profits?

Knoxville Manufacturing Company produces X and Y with contribution margins per unit of $10 and $90, respectively. Only 200 labor hours and 400 machine hours are available for production. Time requirements to produce one unit of X and Y are as follows: What is the objective function to maximize profits for Knoxville Manufacturing Company?

Safety stock is

Southwestern Supply Company has an economic order quantity for item A of 200 units. The annual demand for the product is 5,000 units, and the cost of placing an order is $8. The carrying cost per unit is

With multiple internal binding constraints, the optimal mix is determined by a graphical approach or the simplex method.

A linear programming model would NOT include which of the following items?