Chapter 11

Question 1

Inventory

Answer 1

stocks or items used to support production and work in process items (raw mats, work in process) supporting activities (maintenance, repair, and operating supplies) and customer service (finished goods and spare parts)

Question 2

Cycle stock inventory

Answer 2

components or products that are received in bulk by a downstream partner, gradually used up and then replenished. (active inventory)

Question 3

Safety Stock

Answer 3

extra inventory companies hold to protect themselves against uncertainties in demand or replenishment time

Question 4

Anticipation Inventory

Answer 4

Inventory that is held in anticipation of customer demand

Question 5

Hedge Inventory

Answer 5

Inventory buildup to buffer against some event that may not happen.

Question 6

transportation inventory

Answer 6

inventory that moves from one link in the supply chain to another.

Question 7

smoothing inventory

Answer 7

smooths out differences between upstream production levels and downstream demand

Question 8

inventory drivers

Answer 8

business conditions that force companies to hold inventory (supply uncertainty)

Question 9

Demand uncertainty

Answer 9

risk of significant and unpredictable fluctuations in the demand for their products

Question 10

independent demand inventory

Answer 10

inventory items whose demand level are beyond a company’s control. ex: kitchen tables

Question 11

dependent demand inventory

Answer 11

inventory items whose demand level is directly tied to company’s planned production (very accurate) ex: kitchen table legs

Question 12

periodic review system

Answer 12

inventory system used to check inventory at regular intervals and restocked to some predetermined level.

Question 13

continuous review system

Answer 13

inventory level is constantly monitored, and when reorder point is reached, an order is released

Question 14

service level

Answer 14

amount of demand to be me under conditions of demand and supply uncertainty

Question 15

Economic order quantity (EOQ)

Answer 15

minimizes the holding and ordering costs for an item

Question 16

single period inventory system

Answer 16

when excess inventory cannot be held in the future, firmst must weigh the cost of being short against the cost of excess units.

Question 17

goals of single period inventory system

Answer 17

determine a larger service level that strikes the best balance between expected shortage costs and excess costs.

Question 18

target service level/target stocking point

Answer 18

service level at which expected costs of a shortage equals expected cost of having excess units

Question 19

bull whip effect

Answer 19

an extreme change in the supply position upstream in a supply chain, generated by a small change in demand downstream in supply chain

Question 20

inventory positioning

Answer 20

cost and value increases and flexibility decreases down the supply chain.