Deck 9: Managing Inventory in the Supply Chain

Question 1

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

Answer 1

True

Question 2

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

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

Answer 2

D

Question 3

EOQ can only be used for "push" inventory.

Answer 3

False

Question 4

The ABC analysis is based on Pareto's law.

Question 5

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

Question 6

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

Question 7

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

Question 8

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.

Question 9

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 10

Purchase economies and transportation economies are not complementary.

Question 11

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

Question 12

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 13

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

Question 14

Capital cost is also called interest or opportunity cost.

Question 15

ABC analysis uses a single criterion to classify SKUs from most important to least important.

A) True
B) False
C) I have no idea

Question 16

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

Question 17

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

Question 18

Storage space costs are not variable.

Question 19

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

Question 20

This type of inventory is influenced by the reliability of demand and lead time.

A) Cycle stock
B) WIP
C) Safety stock
D) Seasonal stock

Question 21

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

Question 22

Compare and contrast the fixed quantity version of EOQ with the fixed interval version. In which situations would each be used?

Question 23

JIT is a _____ system.

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

Question 24

The fixed order interval EOQ model is best used for SKUs with:

A) variable demand.
B) stable demand.
C) unknown demand.
D) seasonal demand.

Question 25

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

Question 26

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 27

As Q decreases for EOQ, the cost per order:

A) increases.
B) decreases.
C) stays the same.
D) can't be determined.

Question 28

Discuss how seasonality can affect inventory.

Question 29

How can inventory carrying cost be calculated for a specific product? What suggestions would you offer for determining the measure of product value to be used in this calculation?

Question 30

What is Vendor Managed Inventory?

Question 31

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) Kanban
B) VMI/consignment
C) MRP
D) JIT

Question 32

Perpetual inventory systems are required for any EOQ model having _____ demand while periodic inventory systems are used for EOQ models having _____ demand.

A) variable; variable
B) variable; constant
C) constant; constant
D) constant; variable

Question 33

Capital cost focuses on the cost of capital tied up in _____ and the resulting lost opportunity from investing that capital elsewhere.
A) plants

A) distribution centers
B) inventory
B) WIP

Question 34

Seasonal stocks are not influenced by:

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

Question 35

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

Question 36

WIP inventories:

A) are 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 37

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.