Lecture 7

Question 1

Lot / Batch size

Answer 1

The quantity that a stage of the supply chain produces/purchases at a tim

Question 2

Cycle inventory

Answer 2

The average inventory in a supply chain

Question 3

Fixed-order quantity model

Answer 3

Also called EOQ (Economic Order Quantity) and Q-model

Event triggered.

Question 4

Fixed-time period models

Answer 4

Also called the periodic system, periodic review system, fixed-order interval system and P-model

Time triggered.

Question 5

6 Characteristics Fixed-Order Quantity

Answer 5

• Inventory remaining must be continually monitored
• Has a smaller average inventory
• Favors more expensive items
• More appropriate for important items
• Requires more time to maintain - but is usually more automated
• More expensive to implement

Question 6

6 Characteristics Fixed-Time Period

Answer 6

• Counting takes places only at the end of the review period
• Larger average inventory
• Favors less expensive items
• Sufficient for less-important items
• Requires less time to maintain
• Less expensive to implement

Question 7

Optimal order quantity (Qopt)

Answer 7

Order size that minimizes total annual inventory related costs

Question 8

Fixed-order Quantity Models

Answer 8

Determine specific point (R) and the size of that order (Q)

Question 9

6 Assumptions that represent a starting point FOQ

Answer 9

1. Demand for the product is constant and uniform throughout the period
2. Lead time is constant
3. Price per unit of product is constant
4. Inventory holding cost is based on average inventory
5. Ordering or setup costs are constant
6. All demands for the product will be satisfied

Question 10

Insights EOQ

Answer 10

• There is a direct trade-off between order size and average inventory
• It is a good starting point in most inventory systems
• It helps to focus management attention on process improvement

Question 11

Safety inventory

Answer 11

Carried to satisfy demand that exceeds the amount forecasted

Question 12

Safety stock

Answer 12

Amount of inventory carried in addition to expected demand

Question 13

Fixed-time periods models

Answer 13

• Inventory is counted only at particular times
• Generate order quantities that vary from period to period, depending on usage rates
• Safety stocks must protect against stock outs

Question 14

Replenishment Policy FOQ

Answer 14

1. Inventory is continuously tracked
2. Order for a lot size Q is placed when the inventory declines to the reorder point R
3. Costly but requires less safety stock

Question 15

Replenishment Policy FTP

Answer 15

1. Inventory checked at regular periodic intervals
2. Order is placed to raise inventory level to a specified threshold
3. Requires higher level of safety stock

Question 16

Inventory Turn

Answer 16

Number of times inventory is replaced over a year

Question 17

2 Assumptions basic fixed-order quantity

Answer 17

1. Assumes constant demand
2. Assumes constant price

When demand is uncertain, satefy stock is needed