CPIM Module 5: Safety Stock/Item Segmentation questions and
answers with solutions
Safety Stock - ANSWER In general, a quantity of stock planned to be in
inventory to protect against fluctuations in demand or supply.
Level of Service - ANSWER A measure (usually expressed as a
percentage) of satisfying demand through inventory or by the current
production schedule in time to satisfy the customers' requested delivery
dates and quantities.
on-time schedule performance - ANSWER A measure (percentage) of
meeting the customer's originally negotiated delivery request date.
Performance can be expressed as a percentage based on the number of
orders, line items, or dollar value shipped on time.
stockout percentage - ANSWER A measure of the effectiveness with
which a company responds to actual demand or requirements.
stockkeeping unit (SKU) - ANSWER 1) An inventory item. 2) In a
distribution system, an item at a particular geographic location.
wall-to-wall inventory - ANSWER An inventory management technique in
which material enters a plant and is processed through the plant into
finished goods without ever having entered a formal stock area.
, safety lead time - ANSWER An element of time added to normal lead
time to protect against fluctuations in lead time so that an order can be
completed before its real need date. When used, the MRP system, in
offsetting for lead time, will plan both order release and order
completion for earlier dates than it would otherwise.
carrying cost - ANSWER The cost of holding inventory, usually defined as
a percentage of the dollar value of inventory per unit of time (generally
one year).
ordering costs - ANSWER The costs that increase as the number of orders
placed increases. Used in calculating order quantities. Includes costs
related to the clerical work of preparing, releasing, monitoring, and
receiving orders; the physical handling of goods; inspections; and setup
costs, as applicable.
Production control costs - ANSWER The cost of issuing, closing,
scheduling, loading, dispatching, moving, and expediting open orders.
These costs are made up of the costs for labor, supplies, and operating
expenses for the operations.
Setup costs - ANSWER Setup goes from the last good part of the prior
operation to the first good part of the next operation, so it includes
teardown costs. This cost is incurred per order. (Run time is calculated
per unit.)
answers with solutions
Safety Stock - ANSWER In general, a quantity of stock planned to be in
inventory to protect against fluctuations in demand or supply.
Level of Service - ANSWER A measure (usually expressed as a
percentage) of satisfying demand through inventory or by the current
production schedule in time to satisfy the customers' requested delivery
dates and quantities.
on-time schedule performance - ANSWER A measure (percentage) of
meeting the customer's originally negotiated delivery request date.
Performance can be expressed as a percentage based on the number of
orders, line items, or dollar value shipped on time.
stockout percentage - ANSWER A measure of the effectiveness with
which a company responds to actual demand or requirements.
stockkeeping unit (SKU) - ANSWER 1) An inventory item. 2) In a
distribution system, an item at a particular geographic location.
wall-to-wall inventory - ANSWER An inventory management technique in
which material enters a plant and is processed through the plant into
finished goods without ever having entered a formal stock area.
, safety lead time - ANSWER An element of time added to normal lead
time to protect against fluctuations in lead time so that an order can be
completed before its real need date. When used, the MRP system, in
offsetting for lead time, will plan both order release and order
completion for earlier dates than it would otherwise.
carrying cost - ANSWER The cost of holding inventory, usually defined as
a percentage of the dollar value of inventory per unit of time (generally
one year).
ordering costs - ANSWER The costs that increase as the number of orders
placed increases. Used in calculating order quantities. Includes costs
related to the clerical work of preparing, releasing, monitoring, and
receiving orders; the physical handling of goods; inspections; and setup
costs, as applicable.
Production control costs - ANSWER The cost of issuing, closing,
scheduling, loading, dispatching, moving, and expediting open orders.
These costs are made up of the costs for labor, supplies, and operating
expenses for the operations.
Setup costs - ANSWER Setup goes from the last good part of the prior
operation to the first good part of the next operation, so it includes
teardown costs. This cost is incurred per order. (Run time is calculated
per unit.)
