Final Exam

Question 1

Inventory

Answer 1

A stock or store of goods that is a vital part of businesses because

1. Necessary for operations
2. Contributes to customer satisfaction

Question 2

3 Types of Inventory

Answer 2

1. Raw Materials and Purchases Parts
2. Work In Process (WIP)
3. Finished Goods inventories and merchandise

Question 3

Perpetual Inventory System (Continual System)

Answer 3

a system that keeps track of removals from inventory continuously, thus maintaining current levels of each item. A order is placed when inventory drops to a predetermined level
-Two Bin System

Question 4

Two Bin System

Answer 4

two containers of inventory, reorder when first container is empty (ROP: amount in bin 2)

Question 5

Holding (Carrying) Costs (Ex.5)

Answer 5

cost to carry an item in inventory for a length of time, usually a year.
Ex. Interest, Insurance, Depreciation, Warehousing cost, Deterioration

Question 6

Ordering Cost (Ex.3)

Answer 6

Costs of ordering and receiving inventory

Ex. Preparing invoices, Shipping cost, Inspection of good upon arrival

Question 7

Shortage Costs (Ex.3)

Answer 7

Costs when demand exceeds supply

Ex. Opportunity cost of not making sale, loss of customer goodwill, late charges

Question 8

Cycle Counting

Answer 8

a physical count of items in inventory

Question 9

Basic Inventory Planning Questions

Answer 9

1. How much to order?

2. When to order?

Question 10

2 Inventory Models

Answer 10

1. Fixed Order Quantity Model

2. Fixed Order Interval Model

Question 11

2 Levers for Reducing Safety Inventory

Answer 11

1. Reduce demand variability through improved forecasting

2. Reduce replenishment lead time (service level also)

Question 12

Uniform Distribution

Answer 12

a random variable (x) between some minimum and maximum value are equally likely

Question 13

Underage Cost (Shortage cost)

Answer 13

the unrealized profit per unit

Question 14

Overage Cost (Excess Cost)

Answer 14

cost of overstocking

Question 15

Service Level

Answer 15

is the probability that demand will not exceed the stocking level

Question 16

Material Requirements Planning (MRP)

Answer 16

a computer based information system that translates master schedule requirements for end items into time phased requirements for subassemblies, components and raw materials

Question 17

3 MRP Questions

Answer 17

1. What is needed?
2. How much is needed?
3. When is it needed?

Question 18

3 MRP Inputs

Answer 18

1. Master Schedule
2. Bill of Materials
3. Inventory Records File

Question 19

Define Master Schedule

Answer 19

states which end items are to be produced, when they are needed and in what quantities

Question 20

Define Bill of Materials

Answer 20

a listing of the raw materials, parts, subassemblies and assemblies needed to produce one unit of a product

Question 21

Define Inventory Records File

Answer 21

contains information on the inventory status of each component by time period

Question 22

MRP Output

Answer 22

is a schedule of requirements for all parts and items

Question 23

Product Tree

Answer 23

a visual depiction of the requirements in a bill of materials, where all components are listed by level

Question 24

Inventory Rule + 4 types

Answer 24

information concerning the order size

1. Lot 4 Lot ordering
2. Lot Sizing
3. Economic Order Quantity
4. Fixed Period Ordering

Question 25

Lot 4 Lot Ordering

Answer 25

the order or run size for each period is set equal to demand for that period

Question 26

Lot Sizing

Answer 26

Order size must be in multiples of the lot size

Question 27

Regenerative System

Answer 27

approach that updates MRP Records periodically (batch system that complies all changes and periodically updates system)

Question 28

Net- Change System

Answer 28

approach that updates MRP records continuously (production is modified to reflect changes as they occur)