Deck 14: Inventory Management for Smooth and Continuous Demand Patterns

Question 1

Pilferage of small items such as pencils in the office and tools in the plant,is not rare.

Answer 1

True

Question 2

Buffer stock is stock carried to prevent outages when supply exceeds expectations.

Answer 2

False

Question 3

Systems involving many stock-keeping units are dependent upon having an organized information system.

Answer 3

True

Question 4

Contingency planning for cancellations is better production management than reacting to cancellations after the fact.

Question 5

Lead time is the interval between demand for units by customers and payment for the sales.

Question 6

Each unhappy customer represents a loss of goodwill,defined as the termination of the revenue generation of that customer.

Question 7

The book lists five main kinds of inventory costs: ordering,set-ups,carrying stock,out-of-stock,and costs of running the inventory system.

Question 8

Inventory is comprised of those stocks of items,merchandise,articles,necessities,etc.used to support production and operations,as well as all activities that maintain the processes of the organization,and that provide customer services.

Question 9

Lead time is the interval between order placement and receipt.

Question 10

Vertical integration is achieved by buying companies able to provide components that are otherwise purchased from suppliers.

Question 11

When the supplier agrees to deliver small JIT quantities of the larger order on a specified schedule the agreement is called vendor releasing.The pricing schedule is based on the large order size.

Question 12

The pure dynamic case of inventory models is also called a one-period model.

Question 13

Backorder costs include the effects of word-of-mouth praise on obtaining new customers.

Question 14

Activity-based costing can help to ascertain an optimal size for the order department

Question 15

Inventory is made internally or purchased externally.The decision is based on quality factors alone.

Question 16

Vendor releasing is where the buyer agrees to purchase large increments at one time.

Question 17

One of the seven classes of inventory situations is order repetition (e.g.,static vs.dynamic) situations.

Question 18

OPP is best when the demand distribution is unknown or unstable.

Question 19

Because of the efficient serialized production of the job shop,ordering costs are low.

Question 20

Freshness dating puts pressure on operations to make and deliver products as much before the freshness date as possible.This results in a decrease in the amount of inventory being carried.

Question 21

The push system of production does not allow deliveries to be made to a workstation until that workstation calls for one or more units of supplies.

Question 22

Set-up costs are the cost of labor to do the set-up work for the new production run and the cost of lost production created by facility shut down during changeover.

Question 23

ELS models can provide continuous delivery of product instead of delivery in batches.

Question 24

Minimum total variable cost is associated with an order quantity Q = where is referred to as .

Question 25

The most important requirement for EOQ and ELS is consistency of independent demand over time with relatively smooth and regular withdrawal patterns of units from stock.

Question 26

Expediting is the process of keeping track of the state of an order and doing what is necessary to facilitate keeping the delivery of that order on schedule.

Question 27

The ELS triangle is divided into two right triangles called A and B.The upward slope of the left side of the A triangle represents the net rate of accumulation of the stock on hand.

Question 28

Perpetual inventory systems were more popular than periodic inventory systems before inventory information was digitized and put online.

Question 29

The two major types of applications of order point policies are the perpetual inventory system and the periodic inventory system.

Question 30

Total carrying costs for the job shop may tend to be higher than those of the flow shop because costs of materials are greater since they are purchased in smaller quantities.

Question 31

Lead times are usually fixed.

Question 32

The maximum total variable cost always occurs at the cross point of Lines A and B,
e.g.,as shown in Figure 14-3.Line A is the variable carrying cost as a function of ordering quantity,Q.Line B is the variable ordering cost as a function of Q.

Question 33

EOQ calls for JIT order quantities when there is extreme reduction of the cost of ordering,extreme reduction of the cost of setting up jobs,and very low costs of carrying inventory.

Question 34

Just in time is the interval between reordering and receiving that order and readying the units for use.

Question 35

Expediting cannot control lead times.

Question 36

The economic lot size is the fixed amount to order,whereas the economic order quantity is the fixed amount to produce whenever the order point is reached.

Question 37

In the IFS,the average number of units carried in stock is determined by the production rate,the run time,and the demand rate.

Question 38

Perpetual inventory systems continuously record inventory received from suppliers and withdrawn by employees.

Question 39

There are two parts in the construction of the reorder point.From zero stock to the mean of the lead time distribution is the left hand side of the normal distribution of demand in the lead time period.The right hand side of the lead time bell shape curve is the buffer stock.

Question 40

Order point policies define the stock level at which an order will be placed.

Question 41

Choosing a larger order size may indicate an intuition that in the future,prices will fall.

Question 42

Total inventory carrying costs are variable costs that depend upon the average number of units stocked ,the cost per unit ,and _____.

A)TC,total inventory costs
B)Q,the number of units per order
C) ,the number of orders placed
D)applicable carrying cost interest rate

Question 43

Lack of coordination diminishes buying power and loses the knowledge-based benefits of the centralized system.

Question 44

Accepting discounts by buying at least a certain amount of material involves _____ costs that may make taking the discount _____.The analysis of total costs with and without the discount is essential.

A)extra;profitable
B)extra;unprofitable
C)less;profitable
D)less;unprofitable

Question 45

_____ about setting the right capacity for supply includes the possibility that demand distribution is changing over time.

A)Uncertainty
B)Confidence
C)Certainty
D)Certitude

Question 46

Dynamic inventory models apply to inventories that are used for _____.

A)flow shops
B)intermittent flow shops
C)batch work that occurs fairly regularly
D)all of the above

Question 47

Inventory management encompasses the widest spectrum of activities related to materials.

Question 48

_____ methods are applicable when demand distributions are predictable.

A)MRP
B)OPP
C)LP
D)HMMS

Question 49

As lead times get _____,inventory systems become _____ sensitive to problems that can arise in the supply chain.

A)shorter;more
B)longer;more
C)longer;less
D)shorter;hyper

Question 50

Which considerations play a major role in deciding whether to make or buy inventory?

A)cost
B)quality required
C)both a and b
D)neither a nor b

Question 51

Web-based tools provide real-time tracking of shipments from the time of order to delivery.

Question 52

Signing a contract to supply a given number of units converts _____ from a risk to a _____.

A)cost estimation;gamble
B)demand;certainty
C)demand;gamble
D)analysis;reality

Question 53

What factors below have a direct effect on carrying costs?

A)pilferage
B)obsolescence
C)deterioration
D)damage
E)all of the above

Question 54

The carrying cost rate of the flow shop is likely to be higher than the job shop because it is more profitable.

Question 55

JIT has different meanings for job shops and flow shops.

Question 56

What professional society has played an influential role in the inventory management area?

A)APICS
B)AMA
C)ABPI
D)ACDM

Question 57

Sensitivity analysis is defined as

A)a diagnostic,analytic method for analyzing the effects of changing factors such as inventory costs to determine the effects.
B)a family of parts or products run on the same line.
C)a good production management reaction to order cancellations after the fact.
D)adaptation to a shift from continuous demand to sporadic demand.

Question 58

Static inventory models are best explained by

A)how much to order in a one-shot decision.
B)how much to order in a fixed amount as required repetitively over a long time.
C)maintaining stock on-hand for every practical reason that materials are needed.
D)ordering additional stock to prevent outages arising from unexpected demands.

Question 59

One of the major inventory costs for EOQ modeling is

A)rented storage space.
B)labor.
C)maintenance.
D)ordering.
E)pilferage.

Question 60

Which one choice is not part of the seven classes of inventory situations?

A)make or buy decisions
B)order repetition
C)inventory reduction decisions
D)lead-time distributions

Question 61

Processing costs that are associated with running the inventory system are referred to as _____ costs.

A)carrying
B)backorder
C)systemic
D)stock-keeping

Question 62

The status of work in process (WIP) can be monitored by means of _____,_____,and _____.

A)processing orders;salvage costs;bar codes
B)salvage costs;costs of central warehousing;RFID
C)bar codes;optical readers;RFID
D)none of the above

Question 63

The equation for total variable cost is:

A)
B)
C)
D)

Question 64

_____ models are also called square root models.

A)JIT
B)EOQ
C)ELS
D)both b and c
E)a,b,and c

Question 65

Material requirements planning (MRP) was developed in the _____.

A)1940s
B)1950s
C)1960s
D)1970s

Question 66

One or more components of lead time is(are) the _____.

A)amount of time required to recognize the need to reorder
B)interval for doing whatever clerical work is needed to prepare the order
C)mail,e-mail,EDI,or telephone intervals to communicate with supplier to place the order
D)delivery time including loading,transit,and unloading transporters
E)all of the above

Question 67

What is the generic name of the model that is the foundation equation for all inventory models of the OPP type? This name applies to most flow shops,job shops,flexible processing,and projects.

A)economic lot size model
B)square root inventory model
C)just-in-time inventory model
D)economic order point model

Question 68

The best definition of a reorder point is

A)the optimal interval between orders with order quantity fixed.
B)the stock-on-hand level at which successive new orders must be placed.
C)the optimal order size when the interval between orders is fixed.
D)the trigger for expediting an order for more stock.

Question 69

The importance of being on time with project completions has led to the development of

A)just-in-time inventory methods.
B)critical path methods.
C)flexible manufacturing systems.
D)order-point policies.

Question 70

_____ is the fixed amount to order from an outside vendor.

A)Economic order quantity
B)Perpetual inventory reorder point
C)Economic lot size
D)Periodic inventory reorder point

Question 71

The cost of ordering materials for the _____ is often higher than for the flow shop because of _____.

A)job shop;high variety and small quantities
B)synchronized shop;JIT requirements
C)project system;union relations
D)custom shop;the vendor release arrangement

Question 72

Identify reasons that account for a producer storing output for batch delivery to certain customers at specific times.

A)lack of storage space at the buyer's site
B)delivery economics
C)JIT agreements between supplier and buyer.
D)all of the above

Question 73

The ELS model gets its name from the fact that the production run quantity is called a _____.

A)batch
B)lot
C)rate
D)economic shipping size

Question 74

The minimum value of TVC can be obtained by _____ methods.

A)quantitative
B)economic
C)graphical
D)trial and error
E)all of the above

Question 75

_____ is extra stock so that when demand is heavier than expected,orders can still be filled.

A)Buffer
B)JIT
C)EOQ
D)ELS

Question 76

The _____ model involves more than one total cost equation,but only one line segment is applicable in each cost break's range.

A)EOQ
B)ELS
C)quantity discount
D)static inventory

Question 77

In an intermittent flow shop the run time is called _____ and non-run time is called _____.

A)off-line;online
B)fast time;slow time
C)online;off-line
D)all of the above

Question 78

If a buyer is willing to wait to have an order filled,the company creates a

A)backorder.
B)outstanding ticket.
C)outage cost.
D)systematic cost.

Question 79

The success of _____ is dependent upon having trusted relations with few suppliers.

A)flow shop design
B)just-in-time (JIT)
C)job shop hopping
D)vendor releasing

Question 80

The _____ triangle of the ELS model (see Figure 14-6) represents demand per day.

A)downward sloping right side of the B
B)upward sloping left side of the A
C)upward sloping right side of the B
D)downward sloping left side of the A