Exam 9: Supply Chain Inventory Management

Which one of the following statements concerning the economic order quantity (EOQ)model is TRUE?

Cycle counting is an inventory-control method whereby storeroom personnel physically count a small percent of the total number of items each day.

Scenario 9.12 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 9.12.What is the standard deviation of demand during lead time?

What is a two-bin system and how does it work?

A(n)________ system is a visual system in which an item's inventory is stored at two different locations.

The primary reason for keeping inventories low is that inventory represents a temporary monetary investment in goods on which a firm must pay interest.

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 inventory holding costs if Burdell orders using the EOQ quantity?

If on-hand inventory = 100 units,scheduled receipts = 100 units and backorders = 100 units,the Inventory Position (IP)is the sum of the three,or 300 units.

What is a base-stock system?

A(n)________ is an order that cannot be satisfied,resulting in the loss of a sale.

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.The purchasing manager decides that,in order to save purchasing time,orders for the XO-01 will be placed every three months,or four times per year.How much does this approach cost Talbot in total annual holding and ordering costs (instead of Talbot ordering using the EOQ quantity)?

Which of the following generates pressure to increase inventories?

When looking at inventory management,the term "lot size" refers to the physical dimensions of the area where the inventory is stored.

Which of the following DOES NOT generate pressure to decrease inventories?

Jan Tuttle is the inventory manager of an art supply store.She uses a periodic review system for all oil paints.The number of periods between orders (P)for red #68 is 15 workdays.(The store operates 50 weeks per year,five workdays per week. )Additional information concerning red #68 follows. Demand = 30 units/workday Standard deviation of daily demand = 4 units/workday Lead-time = 7 workdays Desired cycle-service level = 85% A normal distribution table is appended to this exam. What is the target inventory level T for red #68?

Scenario 9.10 Demand = 52,000 units/year Standard deviation of weekly demand = 110 units Ordering costs = $45/order Holding costs = $0.50/unit/year Cycle-service level = 90% Lead time = 2 weeks Number of weeks per year = 52 weeks A normal distribution table is appended to this exam. -Use the information in Scenario 9.10.If the firm changed to a continuous review system,what would be the reorder point?

________ is the planning and controlling of inventories in order to meet the competitive priorities of the organization.

The scheduled receipts are orders that have been placed but not yet received.

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.

Scenario 9.6 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 9.6.What is the economic order quantity (EOQ)for this item?