SCM 300 Chapter 2 Questions with Correct Answers (Grade A+)
Question 1: inventory
Answer: Items owned by a company for present or future uses in operations RISKS: -Company: theft, late,
sickness, strike, weather -Supplier: Employee sickness, increased demand -Customer risk: Demand
increases, damage
Question 2: lot size
Answer: Accepted order size
Question 3: lead time
Answer: Period between order placement -> Delivery to customer
Question 4: Inventory Classi- fications
Answer: 1. Raw materials 2. WIP 3. FG 4. MRO (machine repair operations) ->(desks, pc's, cleaning
suppliers,etc.) 5. Market inventory (what is on store shelf's right now) 6. Safety Stock (Butter) 7.
Anticipatory Stock (example: shovel inventory during summer) 8. Pipeline inventory (in transit between
points, does NOT have to be on train or truck, *AKA inventory between lead time)
Question 5: Pipeline Invento- ry (Formulas and Examples)
Answer: Pipeline inventory = (daily demand) X (lead time) Pipeline inventory = dL EXAMPLE: 1) define
problem (start: factory, end: retail store, assume 7 day lead time) 2. Demand: 100 units / day 3. Pipeline
inventory = 700
Question 6: Stock keeping unit (SKU)
Answer: a unique identifier for each distinct product to track inventory or sales
Question 7: independent de- mand items
Answer: Demand not influenced by another item
Question 8: Dependent de- mand item
Answer: Demand influenced by another item
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, Question 9: High vs. Low In- ventory
Answer: HIGH PROS -customer service better to meet demand -quantity discounts -fewer order to place
-greater security against fluctuating demand LOW PROS -less space -lower shrinkage (spoilage, theft) -less
handling requirements -less upfront cost
Question 10: Costs of Invento- ry
Answer: -cost to purchase -holding costs (storage, security, etc.) -ordering costs (research, negotiating,
electronic systems) -stock out costs (not having inventory for demand, loss of sale)
Question 11: Demand Fore- casting
Answer: -predictive analysis and/or estimation of consumer demand in future period
Question 12: Q (Variable)
Answer: Lot size
Question 13: D (Variable)
Answer: Annual demand
Question 14: C (Variable)
Answer: Cost to purchase one unit
Question 15: H (Variable)
Answer: Cost to hold one unit for a year
Question 16: S (Variable)
Answer: Cost to place an order
Question 17: Average amount of inventory
Answer: Q/2
Question 18: Number of or- ders placed per year
Answer: D/Q
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Question 1: inventory
Answer: Items owned by a company for present or future uses in operations RISKS: -Company: theft, late,
sickness, strike, weather -Supplier: Employee sickness, increased demand -Customer risk: Demand
increases, damage
Question 2: lot size
Answer: Accepted order size
Question 3: lead time
Answer: Period between order placement -> Delivery to customer
Question 4: Inventory Classi- fications
Answer: 1. Raw materials 2. WIP 3. FG 4. MRO (machine repair operations) ->(desks, pc's, cleaning
suppliers,etc.) 5. Market inventory (what is on store shelf's right now) 6. Safety Stock (Butter) 7.
Anticipatory Stock (example: shovel inventory during summer) 8. Pipeline inventory (in transit between
points, does NOT have to be on train or truck, *AKA inventory between lead time)
Question 5: Pipeline Invento- ry (Formulas and Examples)
Answer: Pipeline inventory = (daily demand) X (lead time) Pipeline inventory = dL EXAMPLE: 1) define
problem (start: factory, end: retail store, assume 7 day lead time) 2. Demand: 100 units / day 3. Pipeline
inventory = 700
Question 6: Stock keeping unit (SKU)
Answer: a unique identifier for each distinct product to track inventory or sales
Question 7: independent de- mand items
Answer: Demand not influenced by another item
Question 8: Dependent de- mand item
Answer: Demand influenced by another item
Page 1
, Question 9: High vs. Low In- ventory
Answer: HIGH PROS -customer service better to meet demand -quantity discounts -fewer order to place
-greater security against fluctuating demand LOW PROS -less space -lower shrinkage (spoilage, theft) -less
handling requirements -less upfront cost
Question 10: Costs of Invento- ry
Answer: -cost to purchase -holding costs (storage, security, etc.) -ordering costs (research, negotiating,
electronic systems) -stock out costs (not having inventory for demand, loss of sale)
Question 11: Demand Fore- casting
Answer: -predictive analysis and/or estimation of consumer demand in future period
Question 12: Q (Variable)
Answer: Lot size
Question 13: D (Variable)
Answer: Annual demand
Question 14: C (Variable)
Answer: Cost to purchase one unit
Question 15: H (Variable)
Answer: Cost to hold one unit for a year
Question 16: S (Variable)
Answer: Cost to place an order
Question 17: Average amount of inventory
Answer: Q/2
Question 18: Number of or- ders placed per year
Answer: D/Q
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