OMGT Exam 3 Study Guide | Operations Management Review, Key Concepts & Practice
Questions
B - ANS ✔✔A local barbecue joint makes one massive batch of potato salad each day. If they run
out of this savory side before the end of the day, their last few customers are less than satisfied,
but if they make too much, they sell it to the local hog farmer for feed. Every serving costs an
equivalent of $0.23 to make, but can be sold for $1.50 to customers and for $0.08 to the hog
farmer. The average daily demand is for 200 servings with a standard deviation of 20 servings.
How many servings should be made each day?
a. 220
b. 225
c. 230
d. 235
A - ANS ✔✔Supply chain inventory:
a. increases in cost as materials move downstream.
b. decreases in value as materials progress downstream.
c. increases in flexibility as materials progress upstream.
d. is governed by the bullwhip effect, which says a small change downstream can cause a large
change upstream.
A - ANS ✔✔The inventory that companies hold to protect themselves against uncertainties in
either demand or replenishment time is called:
a. safety stock.
b. anticipation inventory.
c. hedge inventory.
d. smoothing inventory.
,D - ANS ✔✔Individual links in the supply chain can stabilize their production at the most
efficient level by using:
a. safety stock.
b. anticipation inventory.
c. linkage inventory
d. smoothing inventory.
B - ANS ✔✔The mismatch between timing of customer demand and supply chain lead times is
what drives the need for:
a. safety stock.
b. anticipation inventory.
c. cycle stock.
d. hedge inventory.
D - ANS ✔✔The factory produces product and ships it to the distributor. The distributor sends it
to the wholesaler when they receive an order. The wholesaler ships the product to the retailer
as the retailer requests replenishment. The customer visits the retailer's bricks and mortar store
to purchase the product when they run out. Which of these supply chain members is most likely
subjected to the greatest variability in customer demand?
a. retailer
b. wholesaler
c. distributor
d. factory
A - ANS ✔✔Tata Motors assembles cars from their own parts and subassemblies and also
controls the mining and fabrication of the materials used to create those parts. When Anand
ordered their luxury sedan with the platinum dashboard he knew he wouldn't be taking delivery
of his dream car the next week. Rather, he would be waiting a while thanks to:
a. a mismatch between supply chain lead time and customer demand.
, b. a mismatch between overall demand levels and productive capacity.
c. a mismatch between demand and the most efficient production volume.
d. a mismatch between demand and the most efficient shipment volume.
C - ANS ✔✔Which of the following relationships shows dependent demand inventory?
a. A business purchases a new car when the old one wears out.
b. A tire maker buys cleaning supplies.
c. An automaker purchases four tires for each car they produce.
d. A winemaker buys grapes from farmers in the Columbia Valley.
B - ANS ✔✔The beef jerky driver shows up every Monday to take orders from his convenience
store customers. One fine Monday morning he stops in the Quik-E Mart and notes that there
are only three sticks on the shelves. Consulting his route sheet, he discovers that the restock
level is 40. The order quantity is therefore:
a. 3 sticks.
b. 37 sticks.
c. 40 sticks.
d. Cannot be determined with the information given.
C - ANS ✔✔A hospital's biomedical repair shop uses a 4-week periodic system to maintain the
inventory on the blood pressure cuff repair parts. They use an average 40 adult arm cuffs with a
standard deviation of 6 cuffs every four weeks. Cuffs aren't the most critical item they carry, but
the manager would like to avoid the embarrassment of a stockout at least 95% of the time.
What should their restocking level be?
a. 40 cuffs
b. 46 cuffs
c. 50 cuffs
d. 52 cuffs
Questions
B - ANS ✔✔A local barbecue joint makes one massive batch of potato salad each day. If they run
out of this savory side before the end of the day, their last few customers are less than satisfied,
but if they make too much, they sell it to the local hog farmer for feed. Every serving costs an
equivalent of $0.23 to make, but can be sold for $1.50 to customers and for $0.08 to the hog
farmer. The average daily demand is for 200 servings with a standard deviation of 20 servings.
How many servings should be made each day?
a. 220
b. 225
c. 230
d. 235
A - ANS ✔✔Supply chain inventory:
a. increases in cost as materials move downstream.
b. decreases in value as materials progress downstream.
c. increases in flexibility as materials progress upstream.
d. is governed by the bullwhip effect, which says a small change downstream can cause a large
change upstream.
A - ANS ✔✔The inventory that companies hold to protect themselves against uncertainties in
either demand or replenishment time is called:
a. safety stock.
b. anticipation inventory.
c. hedge inventory.
d. smoothing inventory.
,D - ANS ✔✔Individual links in the supply chain can stabilize their production at the most
efficient level by using:
a. safety stock.
b. anticipation inventory.
c. linkage inventory
d. smoothing inventory.
B - ANS ✔✔The mismatch between timing of customer demand and supply chain lead times is
what drives the need for:
a. safety stock.
b. anticipation inventory.
c. cycle stock.
d. hedge inventory.
D - ANS ✔✔The factory produces product and ships it to the distributor. The distributor sends it
to the wholesaler when they receive an order. The wholesaler ships the product to the retailer
as the retailer requests replenishment. The customer visits the retailer's bricks and mortar store
to purchase the product when they run out. Which of these supply chain members is most likely
subjected to the greatest variability in customer demand?
a. retailer
b. wholesaler
c. distributor
d. factory
A - ANS ✔✔Tata Motors assembles cars from their own parts and subassemblies and also
controls the mining and fabrication of the materials used to create those parts. When Anand
ordered their luxury sedan with the platinum dashboard he knew he wouldn't be taking delivery
of his dream car the next week. Rather, he would be waiting a while thanks to:
a. a mismatch between supply chain lead time and customer demand.
, b. a mismatch between overall demand levels and productive capacity.
c. a mismatch between demand and the most efficient production volume.
d. a mismatch between demand and the most efficient shipment volume.
C - ANS ✔✔Which of the following relationships shows dependent demand inventory?
a. A business purchases a new car when the old one wears out.
b. A tire maker buys cleaning supplies.
c. An automaker purchases four tires for each car they produce.
d. A winemaker buys grapes from farmers in the Columbia Valley.
B - ANS ✔✔The beef jerky driver shows up every Monday to take orders from his convenience
store customers. One fine Monday morning he stops in the Quik-E Mart and notes that there
are only three sticks on the shelves. Consulting his route sheet, he discovers that the restock
level is 40. The order quantity is therefore:
a. 3 sticks.
b. 37 sticks.
c. 40 sticks.
d. Cannot be determined with the information given.
C - ANS ✔✔A hospital's biomedical repair shop uses a 4-week periodic system to maintain the
inventory on the blood pressure cuff repair parts. They use an average 40 adult arm cuffs with a
standard deviation of 6 cuffs every four weeks. Cuffs aren't the most critical item they carry, but
the manager would like to avoid the embarrassment of a stockout at least 95% of the time.
What should their restocking level be?
a. 40 cuffs
b. 46 cuffs
c. 50 cuffs
d. 52 cuffs
