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Q:
In ABC analysis, "A" Items are the most tightly controlled.
Q:
ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities used.
Q:
Work-in-process inventory is devoted to maintenance, repair, and operations.
Q:
One function of inventory is to take advantage of quantity discounts.
Q:
Which item to order and with which supplier the order should be placed are the two fundamental issues in inventory management.
Q:
A major challenge in inventory management is to maintain a balance between inventory investment and customer service.
Q:
According to the global company profile, Amazon.com's advantage in inventory management comes from its almost fanatical use of economic order quantity and safety stock calculations.
Q:
A newspaper boy is trying to perfect his business in order to maximize the money he can save for a new car. Paper sales are normally distributed, with a mean of 100 and standard deviation of 10. He sells papers for $.5 and pays $.30 for them. Unsold papers are trashed with no salvage value. How many papers should he order each day and what % of the time will he experience a stockout? Are there any drawbacks to the order size proposed and how could the boy address such issues?
Q:
Milk is stocked at the grocery store each week. At the end of the week unsold milk is reduced in price by 70% and always sells for this lower price instantly. If demand for milk is normal with a mean of 200 gallons and standard deviation of 25 gallons, find the price a fresh gallon of milk sells for. Assume a service level of 95% and that the store purchases milk for $2 per gallon.
Q:
Demand for gallons of milk is normal with a weekly mean of 50 and standard deviation of 15. How many additional gallons of milk must be stocked to increase the service level from 50% to 80%?
Q:
Consider a local club selling Christmas trees. If demand is normal with a mean of 200 and a standard deviation of 50, how many trees should the club stock if service level must be greater than 95%?
Q:
Consider a local club selling Christmas trees. If trees cost $15 and sell for $60 with no salvage value, what is the ideal service level? If salvage value is increased to $5, what is the change in service level?
Q:
Consider a product with a daily demand of 400 units, a setup cost per production run of $100, a monthly holding cost per unit of $2.00, and an annual production rate of 292,000 units. The firm operates and experiences demand 365 days per year. Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the POQ model. How much money per year has that mistake cost the company?
Q:
The inventory management costs for a certain product are S=$8 to order, and H=$1 to hold for a year. Annual demand is 2400 units. Consider the following ordering plans: (a) order all 2400 at one time, (b) order 600 once each quarter, and (c) order 200 once each month. Calculate the annual costs associated with each plan. Plot these values. Is there another plan, cheaper than any of these? Calculate this, and plot it (plot at least five points) on the grid below. Label your graph carefully.
Q:
Joe's Camera shop has a favorite model that has annual sales of 145. The cost to place an order to replenish inventory is $25 per order, and annual inventory costs are $20. Assume the store is open 350 days per year.
a. What is the optimal order size?
b. What is the optimal number of orders per year?
c. What is the optimal number of days between orders?
d. What is the annual inventory cost?
Q:
An organization has had a policy of ordering 70 units at a time. Their annual demand is 340 units, and the item has an annual carrying cost of $2. The assumptions of the EOQ are thought to apply. For what value of ordering cost would this order size be optimal?
Q:
Holding costs are $35 per unit per year, the ordering cost is $120 per order, and sales are relatively constant at 300 per month. What is the optimal order quantity? What are the annual inventory management costs?
Q:
Pointe au Chien Containers, Inc., manufactures in batches; the manufactured items are placed in stock. Specifically, the firm is questioning how best to manage a specific wooden crate for shipping live seafood, which is sold primarily by the mail/phone order marketing division of the firm. The firm has estimated that carrying cost is $4 per unit per year. Other data for the crate are: annual demand 60,000 units; setup cost $300. The firm currently plans to satisfy all customer demand from stock on hand. Demand is known and constant.
a. What is the cost minimizing size of the manufacturing batch?
b. What is the total cost of this solution?
Q:
Groundz Coffee Shop uses 4 pounds of a specialty tea weekly; each pound costs $16. Carrying costs are $1 per pound per week because space is very scarce. It costs the firm $8 to prepare an order. Assume the basic EOQ model with no shortages applies. Assume 52 weeks per year, closed on Mondays.
a. How many pounds should Groundz order at a time?
b. What is total annual cost (excluding item cost) of managing this item on a cost-minimizing basis?
c. In pursuing lowest annual total cost, how many orders should Groundz place annually?
d. How many days will there be between orders (assume 310 operating days) if Groundz practices EOQ behavior?
Q:
The annual demand for an item is 40,000 units. The cost to process an order is $40 and the annual inventory holding cost is $3 per item per year. What is the optimal order quantity, given the following price breaks for purchasing the item? Quantity
Price 1-1,499
$2.50 per unit 1,500 - 4,999
$2.30 per unit 5,000 or more
$2.25 per unit a. What is the optimal behavior?
b. Does the firm take advantage of the lowest price available? Explain.
Q:
A local artisan uses supplies purchased from an overseas supplier. The owner believes the assumptions of the EOQ model are met reasonably well. Minimization of inventory costs is her objective. Relevant data, from the files of the craft firm, are annual demand (D) =150 units, ordering cost (S) = $42 per order, and holding cost (H) = $4 per unit per year
a. How many should she order at one time?
b. How many times per year will she replenish her inventory of this material?
c. What will be the total annual inventory costs associated with this material?
d. If she discovered that the carrying cost had been overstated, and was in reality only $1 per unit per year, what is the corrected value of EOQ?
Q:
The annual demand for an item is 10,000 units. The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. What is the optimal order quantity, given the following price breaks for purchasing the item? What price should the firm pay per unit? What is the total annual cost at the optimal behavior? Quantity
Price 1-9
$2.95 per unit 10 - 999
$2.50 per unit 1,000 - 4,999
$2.30 per unit 5,000 or more
$1.85 per unit
Q:
Clement Bait and Tackle has been buying a chemical water conditioner for its bait (to help keep its baitfish alive) in an optimal fashion using EOQ analysis. The supplier has now offered Clement a discount of $0.50 off all units if the firm will make its purchases monthly or $1.00 off if the firm will make its purchases quarterly. Current data for the problem are: D = 720 units per year; S = $6.00, I = 20% per year; P = $25.
a. What is the EOQ at the current behavior?
b. What is the annual total cost, including product cost, of continuing their current behavior?
c. What are the annual total costs, if they accept either of the proposed discounts?
d. At the cheapest of the total costs, are carrying costs equal to ordering costs? Explain.
Q:
A product has variable demand and constant lead time. Currently this product is managed by a fixed-period inventory system, for which the review period is one week. Lead time is four weeks. Annually about 5,200 units of this product are sold. The current target inventory is 500 units. Today is review day; 75 units are on the shelves, and orders placed at previous reviews in the amount of 110, 60, and 30 have not yet been received. There are no backorders.
a. How much is the firm allowing for safety stock in this case?
b. What should be the order amount this week?
Q:
a. What reorder point provides a 50 percent service level?
b. What reorder point provides a 90 percent service level?
c. If the lead time standard deviation can be reduced from 3 days to 1, what reorder point now provides 90 percent service? How much is safety stock reduced by this change?
Answer: This problem requires formula 12-16 since demand is constant but lead time is variable.
Q:
A product has a reorder point of 260 units, and is ordered ten times a year. The following table shows the historical distribution of demand values observed during the reorder period. Demand
Probability 240
.1 250
.2 260
.4 270
.2 280
.1 Currently, stockouts are valued at $5 per unit per occurrence, while inventory carrying costs are $2 per unit per year. Should the firm add safety stock? If so, how much safety stock should be added?
Q:
Demand for a product is approximately normal, averaging 5 units per day with a standard deviation of 1 unit per day. Lead time for this product is approximately normal, averaging 10 days with a standard deviation of 3 days. What reorder point provides a service level of 90 percent?
Q:
Identify the reasons for making in the make-or-buy decision.
Q:
What are the special requirements of supply-chain systems in global environments?
Q:
What are the three versions of online catalogs?
Q:
As the firm strategies vary from low-cost to response to differentiation, how does this impact the criteria used for selection of a supply-chain strategy?
Q:
What is e-procurement?
Q:
The fastest growing mode of shipping is __________.
Q:
__________ is an approach that seeks efficiency of operations through the integration of all material acquisition, movement, and storage activities.
Q:
Of the three stages of vendor selection, the stage at which criteria, weights, and scores allow a numeric comparison is __________.
Q:
__________ is the term describing purchasing facilitated through the internet.
Q:
__________ is a standardized data-transmittal format for computerized communications between organizations.
Q:
__________ involves reducing the number of variations in materials and components as an aid to cost management.
Q:
__________ postpones final assembly of a product so the distribution channel can assemble it.
Q:
__________ involves delaying any modifications or customization to the product as long as possible in the production process.
Q:
Local optimization, incentives, and large lots all contribute to __________ about what is really occurring in the supply chain.
Q:
__________ rely on a variety of supplier relationships to provide services on demand.
Q:
__________ is a Japanese term to describe suppliers who become part of a company coalition.
Q:
__________ is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.
Q:
The supply-chain strategy of __________ increases the willingness to participate in JIT.
Q:
The __________ is an organization that has published principles and standards for ethical supply management conduct.
Q:
Transferring to external vendors a firm's activities that have traditionally been internal is known as __________.
Q:
The __________ decision involves choosing between producing a component or a service internally and purchasing it externally.
Q:
__________ is the management of activities that procure raw materials, transform those materials into intermediate goods and final products, and deliver the products through a distribution system.
Q:
Consider a firm with a 2007 net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, how many weeks of supply does the firm hold?
A) 12.50
B) 5.20
C) 2.60
D) 0.08
E) 4.16
Q:
Which one of the following performance measures is not true of a world class firm?
A) short time placing an order
B) high percentage of accepted material
C) large lead time
D) high percentage of on-time deliveries
E) low number of shortages per year
Q:
Which of the following devices represents an opportunity for technology to improve security of container shipments?
A) devices that identify truck and container location
B) devices that sense motion
C) devices that measure radiation or temperature
D) devices that can communicate the breaking of a container lock or seal
E) all of the above
Q:
Which distribution system is the fastest growing mode of shipping?
A) railroads
B) trucks
C) airfreight
D) waterways
E) pipelines
Q:
By which distribution system is 90 percent of U.S. coal shipped?
A) railroads
B) trucks
C) waterways
D) pipelines
E) none of the above
Q:
With the growth of JIT, which of the following distribution systems has been the biggest loser?
A) trucking
B) railroads
C) airfreight
D) waterways
E) pipelines
Q:
Which one of the following distribution systems offers quickness and reliability when emergency supplies are needed overseas?
A) trucking
B) railroads
C) airfreight
D) waterways
E) pipelines
Q:
The three stages of vendor selection, in order, are
A) vendor evaluation, vendor development, and negotiations
B) vendor development, vendor evaluation, and vendor acquisition
C) introduction, growth, and maturity
D) vendor evaluation, negotiations, and vendor development
E) EDI, ERP, and ASN
Q:
Consider a firm with a 2007 net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, what is the inventory turnover?
A) 12.50
B) 10.00
C) 42.00
D) 4.16
E) 20.00
Q:
The three classic types of negotiation strategies are
A) vendor evaluation, vendor development, and vendor selection
B) Theory X, Theory Y, and Theory Z
C) many suppliers, few suppliers, and keiretsu
D) cost-based price model, market-based price model, and competitive bidding
E) None of the above is correct.
Q:
E-procurement
A) works best in long-term contract situations, and is not suited for auctions
B) is the same thing as Internet purchasing
C) represents only the auction and bidding components of Internet purchasing
D) is illegal in all states except Nevada and New Jersey
E) All of the above are true of e-procurement.
Q:
What term is used to describe the outsourcing of logistics?
A) E-Logistics
B) Shipper Managed Inventory (SMI)
C) Hollow Logistics
D) Sub-Logistics
E) Third-Party Logistics
Q:
What is the average capacity utilization in the motor carrier (trucking) industry?
A) 25%
B) 50%
C) 75%
D) 95%
E) 99%
Q:
A grocery store is trying to find a new vendor for carrots. Its three criteria are 1. Freshness, 2. Lot Size, and 3. Cost with factor weights of .6, .1, and .3 respectively. What would a vendor with ratings of 6, 8, and 10 in the three respective categories score as a weighted total?
A) 24
B) 1
C) 7.4
D) 9.8
E) none of the above
Q:
TAL Apparel's management of its supply chain for Stafford shirts sold in JCPenney in an example of
A) blanket orders
B) standardization
C) postponement
D) lot size reduction
E) single stage control of replenishment
Q:
A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing
A) postponement
B) drop shipping
C) channel assembly
D) passing the buck
E) float reduction
Q:
Which of the following is an advantage of the postponement technique?
A) reduction in automation
B) early customization of the product
C) better quality of the product
D) reduction in training costs
E) reduction in inventory investment
Q:
All of the following are "opportunities" for supply-chain management except
A) postponement
B) drop shipment
C) blanket orders
D) channel assembly
E) line balancing
Q:
Hewlett-Packard withholds customization of its laser printers as long as possible. This is an example of
A) vendor-managed inventory
B) standardization
C) backward integration
D) postponement
E) timely customization
Q:
A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing
A) postponement
B) cross-docking
C) channel assembly
D) drop shipping
E) float reduction
Q:
Drop shipment
A) is equivalent to cross-docking
B) is the opposite of a blanket order
C) means the supplier will ship directly to the end consumer, rather than to the seller
D) is the same thing as keiretsu
E) is a good reason to find a new firm to ship your products
Q:
Which of the following is an opportunity for effective management in the supply chain?
A) random "pull" data
B) multistage control of replenishment
C) the bullwhip effect
D) customer managed inventory
E) channel assembly
Q:
Which of the following is not an opportunity for effective management in the supply chain?
A) accurate "pull" data
B) vendor-managed inventory
C) postponement
D) local optimization
E) channel assembly
Q:
Giving quantity discounts based on annual volume instead of single order size helps to control which supply-chain issue?
A) control risk
B) environmental risk
C) the bullwhip effect
D) unethical supplier behavior
E) vendor-managed inventory
Q:
A restaurant runs a special promotion on lobster and plans to sell twice as many lobsters as usual. When this large order is sent to the distributer, the distributer assumes the large size is a trend, not a one-time event. The distributer therefore places an even larger order with the lobsterman. This is the result of
A) double marginalization
B) the bullwhip effect
C) CPFR
D) a pass-through facility
E) vendor-managed inventory
Q:
The "bullwhip" effect
A) occurs as orders are relayed from retailers to wholesalers
B) results in increasing fluctuations at each step of the sequence
C) increases the costs associated with inventory in the supply chain
D) occurs because of distortions in information in the supply chain
E) all of the above
Q:
Local optimization is a supply-chain complication best described as
A) optimizing one's local area without full knowledge of organizational needs
B) obtaining very high production efficiency in a decentralized supply chain
C) the prerequisite of global optimization
D) the result of supply chains built on suppliers with compatible corporate cultures
E) the opposite of the bullwhip effect
Q:
Which of the following best describes Vizio's supply chain
A) few suppliers
B) keiretsu
C) joint venture
D) vertical integration
E) virtual company
Q:
When Daimler and BMW pooled resources to develop standardized auto components the supply-chain strategy could best be described by
A) keiretsu
B) virtual companies
C) joint venture
D) vertical integration
E) few suppliers
Q:
An advantage of a joint venture over vertical integration is
A) reduced risk
B) reduced costs
C) compromised competitive advantages
D) globalization
E) flexibility
Q:
Which of the following is not an advantage of a virtual company?
A) speed
B) total control over every aspect of the organization
C) specialized management expertise
D) low capital investment
E) flexibility