Chapter 11 Flashcards
most appropriate for 1 time purchase of an item
single period model
is most appropriate for when inventory is replenished only in fixed intervals of time, ex: first Monday of each month
. Fixed-time period model
most appropriate when fixed amount is purchased each time an order is placed
Fixed-order quantity model
. Based on EOQ’s style ordering criterion, the ____ must be taken to “0” if the desire is to have an order quantity of a single unit
setup or ordering cost
described as the demand that is accurately calculated to meet the need of a production schedule for ex.
Dependent demand
Independent demand
used to describe demand that is uncertain and needs to be forecast
We are ordering T-shirts for the Spring party and are selling them for twice what we paid for them. We expect to sell 100 shirts and the standard deviation associated with out forecast is 10 shirts. How many shirts should we order?
100
We have an item that we stock in our store that has fairly steady demand. Our supplier insists that we buy 1200 units at a time. The lead time is very short on the item, since the supplier is only a few blocks away and we can pick up another 1200 units when we run out. How many units do you expect to have in inventory, on average?
600
For the item described in question 8, if we expect to sell approximately 15,600 units next year, how many trips will we need to make to the supplier over the year?
13 trips
If we decide to carry 10 units of safety stock for item described in questions 8 + 9, we implemented this by going to our supplier when we had 10 units left, how much inventory would you to expect to have on average?
610 units
We’re being evaluated based on % of total demand met in a year (not the probability of stocking out as used in the chapter). Consider an item that we are managing using a fixed-order quantity model with safety stock. We decide to double the order quantity but leave the reorder point the same. Would you expect the percentage of total demand met next year to go up or down? Why?
Go up (we are taking fewer chances of running out)
Consider an item for which we have 120 units in inventory. The average demand for the item is 60 units per week. The lead time for the item is exactly 2 weeks and we carry 16 units for safety stock. What is the probability of running out of the item if we order right now?
50 percent
. If we take advantage of a quantity discount, would you expect your average inventory to go up or down? Assume the probability of stocking out criterion stays the same
Will probably go up if the probability of stocking out stays the same
Cycle counting
is an inventory auditing technique where inventory levels are checked more frequently than 1 time in a year.
Cycle counting
A physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year.
INVENTORY
: the stock of any item or resource used in an organization.
INVENTORY SYSTEM
: set of policies and controls that monitor levels of inventory and determine what levels should be maintained, when stock should be replenished and how large orders should be.
MANUFACTURING INVENTORY
Raw materials, finished products, component parts, supplies, and work-in-process.
Purpose of Inventory:
To maintain independence of operations, To meet variation in product demand, to allow flexibility in production scheduling, to provide a safeguard for variation in raw material delivery time.
Holding (carrying costs
insurance, storage facilities, taxes.
Setup (production change) costs
Producing different products requires material, arrangement of specific equipment setup, filling out paperwork, time materials.
Ordering Costs
: Clerical/Managerial costs for purchasing or production order. Item counts, order quantities.
Shortage Costs
Item depletion requires the next order to be completed when stock is finished.
Single-period problem:
Answers the question of how much to order when an item is purchased only one time and it is expected that it will be used and then not reordered
Fixed–order quantity model (Q-model)
An inventory control model where the amount requisitioned is fixed and the actual ordering is triggered by inventory dropping to a specified level of inventory.
Inventory position
The amount on-hand plus on-order minus backordered quantities. In the case where inventory has been allocated for special purposes, the inventory position is reduced by these allocated amounts.
Optimal order quantity (Qopt)
This order size minimizes total annual inventory-related costs.
Fixed–time period model (P-model)
An inventory control model that specifies inventory is ordered at the end of a predetermined time period. The interval of time between orders is fixed and the order quantity varies
