Deck 9: Managing Inventory in the Supply Chain

Question 1

Setting safety stock levels for an organization is now a science.

Answer 1

False

Question 2

Ordering cost refers to the expense of placing an order for additional inventory and does not include the cost or expense of the product itself.

Answer 2

True

Question 3

EOQ can only be used for "push" inventory.

Answer 3

False

Question 4

MRP has been known for some time but lacked interest until recently.

Question 5

JIT is often used to force inventory back up the pipeline and therefore does not reduce inventory.

Question 6

Inventory and the GDP grew at the same rate from 1994 through 2010.

Question 7

Many companies can make a case for using a formal logistics organization to help resolve inventory objective conflicts.

Question 8

JIT, MRP, MRP II, and DRP all incorporate some version of the basic EOQ model into their philosophies.

Question 9

Inventory plays a dual role in organizations. Inventory impacts the cost of goods sold as well as supporting the balance sheet, a new concept only recently receiving attention.

Question 10

The reorder point depends on the orders in-house at that time.

Question 11

Capital cost is also called interest or opportunity cost.

Question 12

"Batching economies" and "cycle stocks" are the same.

Question 13

Storage space costs are not variable.

Question 14

Inventory management is not as important as it once was due to other factors that have come into play.

Question 15

MRPII will not allow an organization to integrate financial planning with operations and logistics.

Question 16

In comparison with the basic EOQ approach, the fixed interval model does not require close surveillance of inventory levels.

Question 17

Most organizations would not operate under conditions of certainty for a variety of reasons.

Question 18

A reason to hold inventory arises when an organization anticipates that an unusual event might occur that will negatively impact its source of supply.

Question 19

JIT was developed in the U.S. and copied by the Japanese.

Question 20

Purchase economies and transportation economies are not complementary.

Question 21

In the event of a "stockout" one of the things that could happen is

A) the vendor's plant shuts down.
B) the cost of capital is increased.
C) the SCOR process would come into play.
D) extra shipping cost may be incurred.

Question 22

Discuss how logistics interfaces with finance, marketing and manufacturing from an inventory standpoint.

Question 23

A DRP system is usually coupled with a _______ system in an attempt to manage the flow and timing of both inbound materials and outbound finished goods.

A) Kan Ban
B) VMI/ Consignment
C) MRP
D) JIT

Question 24

Batching economies or cycle stocks usually arise from three sources. Name them, and discuss one of them in detail.

Question 25

Seasonal stocks are not influenced by

A) EOQ.
B) weather.
C) transportation.
D) holidays.

Question 26

WIP inventories

A) not included on the balance sheet.
B) are associated with manufacturing.
C) are the same as VMI inventories.
D) are not impacted by EOQ.

Question 27

Discuss how seasonality can affect inventory.

Question 28

Dependent demand relates to

A) demand for another inventory item or product.
B) the spare parts needed to fill the order.
C) VMI inventories.
D) the cost of capital for the firm.

Question 29

What are push and pull systems, and name at least one inventory management system that is a push or pull system.

Question 30

Ordering cost refers to the expense of placing an order and

A) includes the cost of capital.
B) relates to the material management concept.
C) does not include the cost of the product.
D) not receiving it.

Question 31

An organization selling its products FOB destination holds the title to the goods until:

A) picked up by the trucker
B) products reach the customer's facility
C) the customer is invoiced
D) the customer receives the goods into their inventory system

Question 32

JIT is a _______ system.

A) push
B) Pareto's Law
C) MRP
D) pull

Question 33

Inventory as an asset on the balance sheet and a __________ on the income statement.

A) liability
B) footnote
C) statement
D) variable expense

Question 34

Inventory and the GDP grew by ______ amounts between 1994 and 2010.

A) the same
B) different
C) inversely proportional
D) exponential

Question 35

Capital cost focuses on the cost of capital tied up in ________and the resulting lost opportunity from investing that capital elsewhere.
A) distribution centers

A) plants
B) inventory
B) WIP

Question 36

Discuss dependent versus independent demand as it is related to inventory.

Question 37

The ABC analysis is based on Pareto's Law.

Question 38

Batching economies or cycle stocks usually arise from three sources. Which of these is not a source?

A) procurement
B) transportation
C) production
D) demand

Question 39

Which department does not have any impact on inventory?

A) finance
B) manufacturing
C) corporate governance
D) marketing

Question 40

Discuss capital cost and include both the hurdle rate and WACC in your answer.

Question 41

Define and discuss Materials Requirements Planning.

Question 42

Describe the ABC Analysis inventory technique.

Question 43

Define and discuss the Just-In-Time approach, and include the four elements necessary for it to be successful.