CH 11 - Inventory Management

Question 1

Inventory management

Answer 1

Achieve great customer service
& reduce inventory costs

Question 2

Functions of inventory

Answer 2

• meet anticipated demand
• smooth production requirements
• buffer operations
• reduce stockouts
• take advantage of order cycles
• protection against price increases
• permit operations

Question 3

Little’s Law

Answer 3

Average amount of inventory in a system = average demand + average time in the system

Question 4

Assumptions of the basic EOQ model

Answer 4

1. One product involved.
2. Known annual demand.
3. constant demand rate.
4. Lead time is known & constant.
5. Single delivery orders.
6. No quantity discounts.

Question 5

Areas that impact inventory management

Answer 5

• Record keeping: up to date records & correct information
• Variation reduction: lead time variations & forecast errors
• Lean operation: goods are pulled through the system to match demand
• Supply chain management: working closely with suppliers, coordinate shipments and reduce lead times