Chapter 11

Question 1

Three models for inventory management:

Answer 1

single-period model
fixed-order quantity model
fixed-time period model

Question 2

single-period model

Answer 2

Used when we are making a one-time purchase of an item

Ex: purchasing t-shirts to sell at a one-time sporting event

Question 3

fixed-order quantity model

Answer 3

Used when we want to maintain an item “in stock,” and when we resupply the item, a certain number of units must be ordered each time

Question 4

fixed-time period model

Answer 4

Similar to fixed-order quantity model
Used when the item should be in stock and ready to use
Item is ordered at certain intervals of time
Ex: every Friday morning

Question 5

Inventory

Answer 5

stock of any item or resource used in an organization

Question 6

Inventory system

Answer 6

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

Question 7

Manufacturing inventory

Answer 7

refers to items that contribute to or become part of a firm’s product output–. Raw materials, finished products, component parts, supplies, and work-in-process

Question 8

Purposes of Inventory

Answer 8

1 .To maintain independence of operations

2. To meet variation in product demand
3. To allow flexibility in production scheduling
4. To provide a safeguard for variation in raw material delivery time
5. To take advantage of economic purchase order size
6. Many other domain-specific reasons

Question 9

Inventory Costs

Answer 9

Holding costs
Setup costs
Ordering costs
Shortage costs

Question 10

Single-Period Inventory Model

Answer 10

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

Question 11

fixed-order quantity model (Q-model, EOQ)

Answer 11

amount ordered is fixed and ordering is triggered by inventory dropping below a certain level

Question 12

Fixed-time period model (P-model)

Answer 12

specified inventory is ordered at the end of a predetermined time period

Question 13

safety stock

Answer 13

amount of inventory carried in addition to the expected demand

Question 14

R
(d-bar)
L
z
(theta)-sub-L

Answer 14

reorder point in units
avg daily demand
lead time in days
# of standard deviations
standard deviation

Question 15

what does P stand for

Answer 15

cumulative probability the unit will not be sold