SCM 300 Exam 1 Module 2 QUESTIONS
& ANSWERS 100% CORRECT!!
Inventory - ANSWER"The items that are owned by a company for the purpose of
present or future sale or for use in day-to-day operations."
Lead time - ANSWER"The period of time between when an order is placed and
when the order is received.
Lot Size - ANSWER"An accepted order size. (Sometimes also refers to a possible
order size increment. Example: Lot size of 100 units. Ordering 100, 200, 300, etc.
would be possible order sizes.)"
Independent vs Dependent Demand - ANSWER"Independent demand item: An item
for which demand levels are not directly impacted by the demand of another related
item.
Dependent demand item: An item for which demand levels are directly impacted by
the demand of another related item."
All 8 Inventory Classifications - ANSWER"Raw Materials - Typically refers to
material, parts, or components that will be used to create an end item or service.
These materials have not yet begun their manufacturing/transformation into a
finished good or service. (Examples: unassembled handles, shafts, and shovel
blades)
Work-in-Process (WIP) - Items that have begun the manufacturing process but are
not yet completed. (Example: Partially assembled shovels)
Finished Goods (FG) - Items that are completed and ready for shipment at a
manufacturing facility or assembly plant. (Example: Fully assembled shovels)
Maintenance, Repair, and Operations (MRO) - Items that are not intended as part of
the finished goods but are important to the daily operations of the company.
(Examples: Desks, computers, cleaning supplies, oil/lubricants, factory equipment)
Market Inventory - Inventory that is readily available on the shelf. (Example: Shovels
on the shelf of Home Depot)
Safety Stock (buffer stock) - Inventory kept to account for variation/uncertainty of
demand. (Example: 100 shovels are sold per week Sunday to Saturday. Shipments
arrive Sunday morning. Stores always wants to start Sunday with 125 units of
inventory. The additional 25 units are safety stock)
Anticipation Inventory - Inventory that is created and stored for future use. Typically
used to absorb uneven rates "of demand that may be related to seasonal demand or
, planned price reductions. (Example: Shovels assembled in summer and stored
through fall in anticipation of large winter demand would be classified as anticipation
inventory.)
Pipeline Inventory - Inventory in transit between two points. Those two points
establish the pipeline. So the inventory does not necessarily need to be on a truck or
train."
High vs. Low Inventory - ANSWER"Pros of High Inventory Levels
Higher levels of customer service - Having inventory will help a company address
their immediate demand for product
Quantity discounts may be possible - Lower per unit costs
Fewer orders will need to be placed - Possibly lower ordering costs and
transportation costs
Greater security against unexpected demand variability
Pros of Low Inventory Levels
Less storage space required - Costs of holding inventory may be lower
Lower chance of inventory obsolescence and shrinkage
Less inventory typically means less materials handling requirements
Less money invested in inventory means more money available for other investment
opportunities
"
All 4 Costs of Inventory - ANSWER"Cost to Purchase - The cost to purchase the
inventory.
Holding Cost - The cost of holding the inventory. Some of the costs this may include
are: Rent for the storage facility, energy and equipment required to keep inventory in
an acceptable environment, insurance, security personnel, employees that handle
inventory, etc.
Ordering Cost - The costs associated with placing an order for inventory. This might
include the cost to research suppliers, negotiate purchase, the cost to have items
shipped, and the upkeep of any electronic ordering system.
Stockout Cost - The costs associated with not having enough inventory on hand to
meet customer demand. This might include loss of the unmet sale in the present, the
loss of any future sales from this customers, cost of expedited shipment, and the
cost of altering operational plans to expedite production"
Inventory Calculations - ANSWER"Average amount of inventory = Q/2"
"Number of orders per year = D/Q"
"Time between orders (in weeks) = (Q/D)*52"
TC Formula - ANSWER"TC = DC + (Q/2)*H + (D/Q)*S
& ANSWERS 100% CORRECT!!
Inventory - ANSWER"The items that are owned by a company for the purpose of
present or future sale or for use in day-to-day operations."
Lead time - ANSWER"The period of time between when an order is placed and
when the order is received.
Lot Size - ANSWER"An accepted order size. (Sometimes also refers to a possible
order size increment. Example: Lot size of 100 units. Ordering 100, 200, 300, etc.
would be possible order sizes.)"
Independent vs Dependent Demand - ANSWER"Independent demand item: An item
for which demand levels are not directly impacted by the demand of another related
item.
Dependent demand item: An item for which demand levels are directly impacted by
the demand of another related item."
All 8 Inventory Classifications - ANSWER"Raw Materials - Typically refers to
material, parts, or components that will be used to create an end item or service.
These materials have not yet begun their manufacturing/transformation into a
finished good or service. (Examples: unassembled handles, shafts, and shovel
blades)
Work-in-Process (WIP) - Items that have begun the manufacturing process but are
not yet completed. (Example: Partially assembled shovels)
Finished Goods (FG) - Items that are completed and ready for shipment at a
manufacturing facility or assembly plant. (Example: Fully assembled shovels)
Maintenance, Repair, and Operations (MRO) - Items that are not intended as part of
the finished goods but are important to the daily operations of the company.
(Examples: Desks, computers, cleaning supplies, oil/lubricants, factory equipment)
Market Inventory - Inventory that is readily available on the shelf. (Example: Shovels
on the shelf of Home Depot)
Safety Stock (buffer stock) - Inventory kept to account for variation/uncertainty of
demand. (Example: 100 shovels are sold per week Sunday to Saturday. Shipments
arrive Sunday morning. Stores always wants to start Sunday with 125 units of
inventory. The additional 25 units are safety stock)
Anticipation Inventory - Inventory that is created and stored for future use. Typically
used to absorb uneven rates "of demand that may be related to seasonal demand or
, planned price reductions. (Example: Shovels assembled in summer and stored
through fall in anticipation of large winter demand would be classified as anticipation
inventory.)
Pipeline Inventory - Inventory in transit between two points. Those two points
establish the pipeline. So the inventory does not necessarily need to be on a truck or
train."
High vs. Low Inventory - ANSWER"Pros of High Inventory Levels
Higher levels of customer service - Having inventory will help a company address
their immediate demand for product
Quantity discounts may be possible - Lower per unit costs
Fewer orders will need to be placed - Possibly lower ordering costs and
transportation costs
Greater security against unexpected demand variability
Pros of Low Inventory Levels
Less storage space required - Costs of holding inventory may be lower
Lower chance of inventory obsolescence and shrinkage
Less inventory typically means less materials handling requirements
Less money invested in inventory means more money available for other investment
opportunities
"
All 4 Costs of Inventory - ANSWER"Cost to Purchase - The cost to purchase the
inventory.
Holding Cost - The cost of holding the inventory. Some of the costs this may include
are: Rent for the storage facility, energy and equipment required to keep inventory in
an acceptable environment, insurance, security personnel, employees that handle
inventory, etc.
Ordering Cost - The costs associated with placing an order for inventory. This might
include the cost to research suppliers, negotiate purchase, the cost to have items
shipped, and the upkeep of any electronic ordering system.
Stockout Cost - The costs associated with not having enough inventory on hand to
meet customer demand. This might include loss of the unmet sale in the present, the
loss of any future sales from this customers, cost of expedited shipment, and the
cost of altering operational plans to expedite production"
Inventory Calculations - ANSWER"Average amount of inventory = Q/2"
"Number of orders per year = D/Q"
"Time between orders (in weeks) = (Q/D)*52"
TC Formula - ANSWER"TC = DC + (Q/2)*H + (D/Q)*S
