Exam 12: Managing Inventory

A specific product has demand during lead time of 100 units,with a standard deviation during lead time of 25 units.What safety stock (approximately)provides a 95% service level?

What happens to the cost of safety stock when the service level increases?

If daily demand is normally distributed with a mean of 15 and standard deviation of 5,and lead time is constant at 4 days,a 90 percent service level will require how much safety stock?

In the production order quantity (POQ)model,inventory does not arrive in a single moment but flows in at a steady rate,resulting in a larger production/order quantity than in an otherwise identical EOQ problem.

In cycle counting,the frequency of item counting and stock verification usually varies from item to item depending upon the item's classification.

The inventory management costs for a certain product are S=$8 to order,and H=$1 to hold for a year.Annual demand is 2400 units.Consider the following ordering plans: (a)order all 2400 at one time, (b)order 600 once each quarter,and (c)order 200 once each month.Calculate the annual holding and setup costs associated with each plan.(d)Is there another plan,cheaper than any of these? Calculate this order quantity along with its total annual holding and setup costs.

What are the assumptions of the EOQ model?

The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers.Mean demand during lead time is 170 trimmers,and the standard deviation during lead time is 60 trimmers.The annual cost of carrying one trimmer in inventory is $6.The area sales people have recently told Winfield's management that they could expect a $400 improvement in profit (based on current figures of cost per trimmer)if the service level were increased to 99%.Is it worthwhile for Winfield to make this change?

Pointe au Chien Containers,Inc. ,manufactures in batches,and the manufactured items are placed in stock.Specifically,the firm is questioning how best to manage a specific wooden crate for shipping live seafood,which is sold primarily by the mail/phone order marketing division of the firm.The firm has estimated that carrying cost is $4 per unit per year.In addition,annual demand = 60,000 units,and setup cost is $300.The firm currently plans to satisfy all customer demand from stock on hand.Demand is known and constant.The production rate is nearly instantaneous. a.What is the cost minimizing size of the manufacturing batch? b.What is the total annual holding and setup cost of this solution?

Service level is:

The new office supply discounter,Paper Clips,Etc.(PCE),sells a certain type of ergonomically correct office chair that costs $300.The annual holding cost rate is 40% of the item cost,annual demand is 900 units,and the ordering cost is $20 per order.The lead time is 4 days.Because demand is variable (standard deviation of daily demand is 2.4 chairs),PCE has decided to establish a customer service level of 90%.The store is open 300 days per year. a.What is the optimal order quantity? b.What is the safety stock? c.What is the reorder point?

Which of the following would NOT generally be a motive for a firm to hold inventories?

Which item to order and with which supplier the order should be placed are the two fundamental issues in inventory management.

A local artisan uses supplies purchased from an overseas supplier.The owner believes the assumptions of the EOQ model are met reasonably well.Minimization of inventory costs is her objective.Relevant data,from the files of the craft firm,are annual demand (D)=150 units,ordering cost (S)= $42 per order,and holding cost (H)= $4 per unit per year a.How many should she order at one time? b.How many times per year will she replenish her inventory of this material? c.What will be the total annual inventory (holding and setup)costs associated with this material (rounded to the nearest dollar)? d.If she discovered that the carrying cost had been overstated,and was in reality only $1 per unit per year,what is the corrected value of EOQ?

Louisiana Specialty Foods can produce its famous meat pies at a rate of 1650 cases of 48 pies each per day.The firm distributes the pies to regional stores and restaurants at a steady rate of 250 cases per day.The cost of setup,cleanup,idle time in transition from other products to pies,etc. ,is $320.Annual holding costs are $11.50 per case.Assume 250 days per year. (a)Determine the optimum production run (batch size). (b)Determine the number of production runs per year. (c)Determine maximum inventory. (d)Determine total inventory-related (setup and carrying)costs per year (rounded to the nearest dollar).

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below,the average amount of inventory on hand: Q* =

Insurance and taxes on inventory are part of the costs known as setup or ordering costs.

What are the four functions of inventory?

When quantity discounts are allowed,the cost-minimizing order quantity:

The purpose of safety stock is to: