Deck 5: Supply chain focused inventory management

Question 1

Choose, among the inventory systems, the system that has the least relations to the following description?
An order is placed whenever the inventory levels fall below reorder point

A) Fixed-order quantity order point system
B) EOQ model
C) Reorder point system
D) Periodic review system

Answer 1

D

Question 2

The company is currently conducting an inventory review.Calculate the target inventory value (T)and the current order size for a P-system.(T/size)
The expected weekly demand is 1250 units.The standard deviation for a week is 250 units.The TBR 4 weeks and the lead time is 1 week.The cycle service level is 94%.After review, it is shown that there are 1260 units on hand.

A) 6600 units/5340 units
B) 7120 units/5860 units
C) 5860 units/4600 units
D) 4600 units/3340 units

Answer 2

B

Question 3

While the assumptions make the EOQ system easier to use, the model becomes less reflective of reality.The incorporation of safety stock relaxes the __________ assumption.The addition of back orders relaxes the __________ assumption.

A) constant lead time/no demand uncertainty
B) constant lead time/no shortages allowed
C) no shortages allowed/no demand uncertainty
D) no demand uncertainty/no shortages allowed

Answer 3

C

Question 4

Describe what kind of costs is included in the accounting cost for holding inventories.Provide examples.

Question 5

When calculating the EOQ size, describe the difference between holding cost per unit per period and the holding cost per unit per year.How would the EOQ equation need to be managed in each case?

Question 6

The classic EOQ model is the simplest form which incorporates all the assumptions regarding uncertainties.Choose the cost components not included in this classic EOQ model but included in the extension models.
1)Ordering costs
2)Safety stock costs
3)Stock out costs
4)Internal storage costs

A) (2)
B) (2) and (3)
C) (1), (2), and (3)
D) None of the above

Question 7

The production-processing technology is divided into two categories.The _____________ produce standardized products through an assembly line, while _________ are used to produce non-standardized products through a job shop.

A) mass production systems/reorder point systems
B) mass production systems/reorder point systems
C) piece flow systems/periodic systems
D) intermittent systems/continuous systems

Question 8

Which of the following products is suited to a P-System?
1)Vending machine soda cans
2)Supplies for Local mom and pop grocery
3)Jewelry

A) (1)
B) (1) and (2)
C) (2) and (3)
D) None of the above

Question 9

Calculate the EOQ size for the following case.What is the EOQ size and the number of orders placed per year? For your answer, round up the figures up to 0 decimal points.(size/number)
The annual demand for the item is 2580 units.It costs $500 to place an order and costs $20 per item to carry it a year without passing it to the customer.

A) 125 units/40 times
B) 275 units/19 times
C) 374 units/9 times
D) 360 units/8 times

Question 10

Select, among the following statements regarding Decoupling stocks, the correct statements.
1)inventories at major stocking points throughout the system
2)allows for each work center to begin at the same starting time
3)Used to absorb random demand uncertainties

A) (1)
B) (3)
C) (1) and (2)
D) None of the above

Question 11

By incorporating the demand uncertainty into EOQ model, the concept of service level is introduced.Service level is associated with how much safety stock to be carried.There are two types of service levels.___________ uses the probability of stocking out as a measure while _____________ uses expected number of units short per reorder cycle.Choose the correct words to fill in the blanks.

A) Cycle service level/customer service levels
B) Cycle service level/order service levels
C) Customer service levels/cycle service level
D) Order service levels/cycle service level

Question 12

Explain is a paragraph how Economic Order Size (EOQ)Model works.Go into detail and do not just include the equation.

Question 13

Choose the incorrect choice regarding the descriptions of the primary functions of inventories.
1)Pipeline inventory: inventories traveling from one location to another
2)Seasonal inventories: inventories accumulated during low sales periods and depleted during high usage periods
3)Safety stocks: inventories used to absorb random demand uncertainties

A) (1)
B) (2)
C) (2) and (3)
D) None of the above

Question 14

ABC Classification uses dollar usage to classify inventory items into categories of importance.There have been attempts to extend the concept of ABC Classification to other more sophisticated measures.Explain why this mostly does not work and why ABC Classification in its simplest form does work.

Question 15

Choose the following assumptions that cannot be considered a classic EOQ assumption.
1)Constant lead time
2)Instantaneous replenishment
3)No quantity discounts available
4)Fixed holding cost per unit

A) (1)
B) (2) and (3)
C) (2) and (4)
D) None of the above

Question 16

The company is using a lot size of 700 units per order.Calculate the safety stock required for a cycle service level of 97.5%.In addition, what is the cost difference between the current policy and using the EOQ lot size? (safety stock/cost)
The expected annual demand is 123,670 units.The standard deviation for a week is 345 units.The ordering cost is $200 and the carrying cost is $3.00 per unit per year.In addition, the lead time is 3 weeks and there are 52 weeks per year.

A) 1171 units/$24,202
B) 8306 units/$36,384
C) 1171 units/$24,202
D) 4060 units/$12,182

Question 17

One type of inventory control system periodically evaluates inventory levels and places an order of to bring back the level to a predetermined level.Choose the systems that can be associated with this type of system.
1)P-System
2)Q-system
3)Periodic review system

A) (1)
B) (2)
C) (1) and (3)
D) None of the above

Question 18

Which of the following statements regarding inventory are incorrect?
1)Other than the cost, holding inventory is good for operations.
2)Inventories account for between 60 and 80 percent of a typical industrial firm's assets
3)WIP inventory is an acronym for work in process inventories.
4)Safety stock is held to maintain a certain level of service regardless of uncertainty

A) (1) and (4)
B) (2) and (4)
C) (1), (3) and (4)
D) (1)

Question 19

In one sentence, define what demand is during lead time.

Question 20

Calculate the EOQ size for the following case.What is the EOQ size and the number of orders placed per quarter? For your answer, round up the figures up to 0 decimal points.(size/number)
The average demand for the item is 540 units per quarter.It costs $150 to place an order.The item's price is $250 per unit and carrying cost ratio for the year is 20%.

A) 147 units/4 times per quarter
B) 147 units/15 times per quarter
C) 74 units/15 times per quarter
D) 74 units/8 times per quarter

Question 21

Given the demand probability table, complete the following table.

Question 22

Discuss what does differentiate the two types of quantity discount methods? (All and incremental)Go into details.

Question 23

Discuss what does differentiate the two types of quantity discount methods? (All and incremental)Go into details.

Question 24

Given the following information and the demand probability table, what is the order policy for the Q-system?
The annual demand is 1800 units.The cost of placing an order is $100 while the cost of holding a unit for a year is $12.00.The cost of stocking out is $33.00.No lead time.

Question 25

Calculate the demand during lead time when both demand and lead time assumptions are relaxed.The following is a demand and lead time probability table.Show your work as a decision tree.

Question 26

Using the E(Z)table, convert a customer service level (CSL)of 99% into a cycle service level.
The weekly demand is 525 units with a standard deviation of 167 units.The lot size is 300 units.

Question 27

In a Q-system, the daily demand is 850 units with a standard deviation of 12 units.The Cycle service level is 97.5%.What is the reorder point?