MGSC 395 FINAL EXAM VERIFIED STUDY GUIDE
inventory management - Answers - the planning and controlling of inventories in order
to meet the competitive priorities of the organization
inventory - Answers - a stock of materials used to satisfy customer demand or to
support the production of services or goods
pressures for small inventories - Answers - -inventory holding cost
-cost of capital
-storage and handling costs
-taxes
-insurances
-shrinkage
pressure for large inventories - Answers - - customer service
-ordering cost
-setup cost
-labor and equipment ultilization
-transportation cost
-payment to suppliers
types of inventory - Answers - 1. raw materials
2. work in progress
3. finished goods
4. cycle inventory
5. safety stock
6. anticipation
7. pipeline
lot sizing principles - Answers - 1. the lot size, Q, varies directly with the elapsed time
between orders (cycle)
2. the longer the time between orders, the greater cycle inventory must be
cycle inventory - Answers - -reduce the lot size
-reduce ordering and setup costs and allow Q to be reduced
-increase repeatability to eliminate the need for changeover
safety stock inventory - Answers - -place orders closer to the time when they must be
received
-improve demand forecasts
-cut lead times
-reduce supply chain uncertainty
-rely more on equipment and labor buffers
, anticipation inventory - Answers - -match demand with production rates
-add new products w/ different demand cycles
-provide off-season promotional campaigns
-offer seasonal pricing plans
pipleine inventory - Answers - -reduce lead time
-find more responsive suppliers and select new carriers
-change Q in thoses cases where the lead time depends on the lot size
ABC analysis - Answers - the planning and controlling of inventories in order to meet the
competitive priorities of the organization
economic order quantity - Answers - the lot size Q that minimizes total annual inventory
holding and ordering costs
five assumptions of economic order quantity - Answers - 1. demand rate is constant and
known
2. no constraints are placed on the size of each lot
3. the only 2 relevant costs are holding and fixed cost per lot for orderings or setup
4. decision for one item can be made independently of the other
5. the lead time is constant and known
don't use economic order quantity - Answers - -make to order strategy
-order size is constrained
modify the economic order quantity - Answers - -quantity discounts
-replenishments not instantaneous
use the economic order quantity - Answers - -make-to-stock
-carrying and setup costs are known and relatively stable
continuous review (Q) system - Answers - -reorder point system and fixed order quantity
system
-for independent demand items
-track inventory position
-includes scheduled reciepts, on hand inventory, and back orders
reorder point - Answers - -choose an appropriate service-level policy
-determine the demand during lead time probability distribution
-determine the safety stock and reorder point levels
two bin system - Answers - visual system
an empty 1st bin signals the need to place an order
inventory management - Answers - the planning and controlling of inventories in order
to meet the competitive priorities of the organization
inventory - Answers - a stock of materials used to satisfy customer demand or to
support the production of services or goods
pressures for small inventories - Answers - -inventory holding cost
-cost of capital
-storage and handling costs
-taxes
-insurances
-shrinkage
pressure for large inventories - Answers - - customer service
-ordering cost
-setup cost
-labor and equipment ultilization
-transportation cost
-payment to suppliers
types of inventory - Answers - 1. raw materials
2. work in progress
3. finished goods
4. cycle inventory
5. safety stock
6. anticipation
7. pipeline
lot sizing principles - Answers - 1. the lot size, Q, varies directly with the elapsed time
between orders (cycle)
2. the longer the time between orders, the greater cycle inventory must be
cycle inventory - Answers - -reduce the lot size
-reduce ordering and setup costs and allow Q to be reduced
-increase repeatability to eliminate the need for changeover
safety stock inventory - Answers - -place orders closer to the time when they must be
received
-improve demand forecasts
-cut lead times
-reduce supply chain uncertainty
-rely more on equipment and labor buffers
, anticipation inventory - Answers - -match demand with production rates
-add new products w/ different demand cycles
-provide off-season promotional campaigns
-offer seasonal pricing plans
pipleine inventory - Answers - -reduce lead time
-find more responsive suppliers and select new carriers
-change Q in thoses cases where the lead time depends on the lot size
ABC analysis - Answers - the planning and controlling of inventories in order to meet the
competitive priorities of the organization
economic order quantity - Answers - the lot size Q that minimizes total annual inventory
holding and ordering costs
five assumptions of economic order quantity - Answers - 1. demand rate is constant and
known
2. no constraints are placed on the size of each lot
3. the only 2 relevant costs are holding and fixed cost per lot for orderings or setup
4. decision for one item can be made independently of the other
5. the lead time is constant and known
don't use economic order quantity - Answers - -make to order strategy
-order size is constrained
modify the economic order quantity - Answers - -quantity discounts
-replenishments not instantaneous
use the economic order quantity - Answers - -make-to-stock
-carrying and setup costs are known and relatively stable
continuous review (Q) system - Answers - -reorder point system and fixed order quantity
system
-for independent demand items
-track inventory position
-includes scheduled reciepts, on hand inventory, and back orders
reorder point - Answers - -choose an appropriate service-level policy
-determine the demand during lead time probability distribution
-determine the safety stock and reorder point levels
two bin system - Answers - visual system
an empty 1st bin signals the need to place an order
