2 paskaita

Question 1

One often-used classification is related to

Answer 1

the flow of materials into, through, and out of a manufacturing organization

Question 2

Inventory categories:

Answer 2

1. Raw materials
2. Work-in-process (WIP)
3. Finished goods
4. Distribution inventories
5. Maintenance, repair, and operating supplies (MROs)

Question 3

Raw Materials:

Answer 3

Purchased items not entered the production process

Question 4

Work-in-process (WIP):

Answer 4

raw materials entered the manufacturing process and being worked on or waiting to be worked on

Question 5

Finished goods:

Answer 5

finished products of the production process ready to be sold as completed items

Question 6

Distribution inventories:

Answer 6

finished goods located in the distribution system

Question 7

Maintenance, repair, and operating supplies (MROs):

Answer 7

items used in production that do not become part of the product (e.g., spare parts)

Question 8

Inventory:

Answer 8

is usually held to compensate the time-lag between supply and demand

Question 9

Inventory serves as a buffer between:

Answer 9

• Supply and demand
• Customer demand and finished goods
• Finished goods and component availability
• Requirements for an operation and the output from the preceding operation
• Parts and materials to begin production and the suppliers of materials

Question 10

Inventories can be classified according to the function they perform:

Answer 10

1. Anticipation inventory
2. Fluctuation inventory (safety stock)
3. Lot-size inventory (or cycle stock)
4. Transportation inventory
5. Hedge inventory
6. Maintenance, Repair, and Operating inventory

Question 11

Anticipation inventory:

Answer 11

It is built up in anticipation of future demand (e.g. stock build-up to fulfil peak season demand)

Question 12

Fluctuation inventory (safety stock):

Answer 12

1. It is held to cover random unpredictable fluctuations in supply and demand or lead time
2. Safety stock is carried to protect against this possibility → its purpose is to prevent disruptions in manufacturing or deliveries to customers

Question 13

Lot-size inventory (or cycle stock):

Answer 13

It relates to items purchased or manufactured in quantities greater than needed immediately → this is to take advantage of quantity discounts, to reduce shipping, setup costs, …

Question 14

Transportation inventory:

Answer 14

It exists because of the time needed to move goods from one location to another (e.g., from a plant to a distribution center)

Question 15

Hedge inventory:

Answer 15

It is related to the products traded on a worldwide market

Question 16

Maintenance, Repair, and Operating inventory:

Answer 16

1. It is used to support general operations and maintenance but that do not become directly part of a product
2. It includes maintenance supplies, spare parts, and consumables such as cleaning compounds, lubricants, pencils, and erasers

Question 17

The following costs are used for inventory management decisions:

Answer 17

1. Item costs (or landed costs)
2. Carrying costs (or holding costs)
3. Ordering costs
4. Stockout costs
5. Capacity-associated costs

Question 18

Item costs (or landed costs)

Answer 18

They include costs related to purchase, transport, custom duties, …

Question 19

Carrying costs (or holding costs)

Answer 19

They consist of capital, storage and risk costs

Question 20

Ordering costs

Answer 20

They include purchase order, production control, setup and teardown, lost capacity, and movement costs

Question 21

Stockout costs

Answer 21

They are associated to back-order, lost sale, lost customer

Question 22

Capacity-associated costs

Answer 22

They are associated to the costs encountered to change production level (overtime, hiring, shift, etc.)

Question 23

Inventory management deals with:

Answer 23

• Which inventory items are most important
• How items are to be controlled
• How much to order at one time
• When to place an order

Question 24

Two main types of review systems:

Answer 24

1. Continuous review system
2. Periodic review system

Question 25

The main difference between continuous and periodic review systems:

Answer 25

1. In Continuous review system: the quantity ordered is the same and the time between orders varies 2. In Periodic Review System: the time between orders is constant and the order quantity varies

Question 26

The review system supports in determining:

Answer 26

- How much to order at one time - When to place an order

Question 27

Economic order quantity (EOQ):

Answer 27

the ideal quantity of units a company should purchase to meet demand while minimizing inventory costs such as holding costs, shortage costs, and order costs

Question 28

Key trade-off of quantity discounts:

Answer 28

1. Smaller quantity - low inventory carrying costs 2. Bigger quantity - lower ordering costs

Question 29

What is the order point?

Answer 29

An order is placed when the on hand inventory reaches a predetermined level, that is the order point. The order point system is used to determine when to reorder

Question 30

Safety stock is intended to protect against uncertainty in supply and demand due to:

Answer 30

1. Quantity uncertainty (fluctuating customer demand, forecast inaccuracy) 2. Timing uncertainty (time of receipt of supply or demand differs from what expected)

Question 31

Safety stock level depends on:

Answer 31

- Demand variability during lead time → higher variability, higher SS - Reorder frequency → higher frequency, lower SS - Desired service level → higher service level, higher SS - Length of lead time → longer lead time, higher SS