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SCM Exam 3 > Chapter 11: Inventory > Flashcards

Chapter 11: Inventory Flashcards

1
Q

According to APICS, those stocks or items used to support production (raw materials and work-in-Process items), supporting activities (maintenance, repair, and operating supplies) and customer service (finished goods and spare parts)

A

Inventory

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2
Q

Components or products that are received in bulk by a downstream partner, gradually used up, and then replenished again in bulk by the upstream partner

A

Cycle stock

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3
Q

Extra inventory that a company holds to protect itself against uncertainties in either demand or replenishment time

A

Safety stock

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4
Q

Inventory that is help in anticipation of customer demand

A

Anticipation inventory

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5
Q

According to APICS, a form of inventory buildup to buffer against some event that may not happen. This involves speculation related to potential labor strikes, price increases, unsettled governments, and events that could severely impair the company’s strategic initiatives

A

Hedge inventory

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6
Q

Inventory that is moving from one link in the supply chain to another

A

Transportation inventory

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7
Q

Inventory that is used to smooth out differences between upstream production levels and downstream demand

A

Smoothing inventory

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8
Q

Business conditions that force companies to hold inventory

A

Inventory drivers

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9
Q

The risk of interruptions in the flow of components from upstream suppliers

A

Supply uncertainty

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10
Q

The risk of significant and unpredictable fluctuations in downstream demand

A

Demand uncertainty

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11
Q

Inventory items whose demand levels are beyond a company’s complete control

A

Independent demand inventory

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12
Q

Inventory items whose demand levels are tied directly to a company’s planned production of another item

A

Dependent demand inventory

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13
Q

An inventory system that is used to manage independent demand inventory. The inventory level for an item is checked at regular intervals and restocked to some predetermined level

A

Periodic review system

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14
Q

A term used to indicate the amount of demand to be met under conditions of demand and supply uncertainty; assumes that the demand during the reorder period and the order lead time is normally distributed

A

Service level

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15
Q

An inventory system used to manage independent demand inventory. The inventory level for an item is constantly monitored, and when the reorder point is reached, an order is released

A

Continuous review system

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16
Q

The order quantity that minimizes annual holding and ordering costs for an item; the relationship between yearly holding costs, yearly ordering costs and the order quantity

A

Economic order quantity (EOQ)

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17
Q

A system used when demand occurs in only a single point in time

A

Single-period inventory

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18
Q

For a single period inventory system, the service level at which the expected cost of a shortage equals the expected cost of having excess units

A

Target service level (SLt)

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19
Q

For a single period inventory system, the stocking point at which the expected cost of a shortage equals the expected cost of having excess units

A

Target stock point (TS)

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20
Q

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

A

Bullwhip effect

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21
Q

Holding safety stock in a single location instead of multiple locations. Several locations then share safety stock inventories to lower overall holding costs by reducing overall safety stock levels

A

Inventory pooling

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22
Q

A purpose of inventory is to maintain

A

Independence of operations

23
Q

A purpose of inventory is to meet

A

Variation in product demand

24
Q

A purpose of inventory is to provide a

A

Safeguard for variation in raw material delivery time

25
Q

To provide a safeguard for variation in raw material delivery time there needs to be protection from what three things

A

Supplier delays
Shortages in supply
Quality problems

26
Q

A purpose of inventory is to allow

A

Flexibility in production scheduling

27
Q

A purpose of inventory is to take

A

Advantage of quantity discounts (economic purchase order size)

28
Q

Example used to demonstrate inventory

A

Wheeled coach video

29
Q

The amount required to bring the inventory level back up to restocking level (R)

A

Order quantity (Q)

30
Q

In a periodic review system Order quantity (Q) equals

A

R (restocking level) - I (inventory level at the time of review)

31
Q

Under the periodic review system the restocking level is equal to

A

Average demand during the reorder period and the order lead time + the z score ( standard deviation of demand during the reorder point and the order lead time)

32
Q

One of the key features of the continuous review system is that inventory levels are

A

Monitored constantly and replenishment order is issued only when a pre-establishes reorder point has been reached

33
Q

One of the key features of the continuous review system is that the size of a replenishment order is

A

Typically based on the trade-off between holding costs and ordering costs

34
Q

One of the key features of the continuous review system is that the reorder point is based on both

A

Demand and supply consideration, as well as on how much safety stock managers want to hold

35
Q

One of the assumptions of the continuous review system is that the inventory item we are interested in has a

A

Constant demand period (d). That is there is no variability in demand from one period to the next. Demand for the year is D.

36
Q

One of the assumptions of the continuous review system is that L is

A

The lead time, or number of periods that must pass before a replenishment order arrives. L is also constant

37
Q

One of the assumptions of the continuous review system is that H is

A

The cost of holding a single unit of inventory for a year. It includes the cost of the space needed to store the unit, the cost of potential obsolescence, and the opportunity cost of tying up the organization’s funds in inventory. H is known and fixed

38
Q

One of the assumptions of the continuous review system is that S is

A

The cost of placing an order, regardless of the order quantity. S is also known and fixed

39
Q

One of the assumptions of the continuous review system is that P, the price of each unit is

A

Fixed

40
Q

When the demand rate and lead time are constant in a continuous review system the ROP is equal to

A

d(L)

41
Q

In a continuous review system yearly holding cost is equal to

A

Average inventory level * per unit holding cost

42
Q

In a continuous review system, the yearly ordering cost is equal to

A

Number of orders per year * fixed ordering cost

43
Q

Another word for holding cost is

A

Carrying cost

44
Q

The formula for the economic order quantity is

A

Q = sqrt(2DS/H)

45
Q

Any quantity with a .000 something is

A

Rounded up

46
Q

When either demand rate (d) or lead time (L) both varies, the formula for the ROP is

A

(d bar * L bar) + SS

47
Q

The decision of how much safety stock to hold depends on what five factors

A 
The variability of demand 
The variability of lead time 
The average length of lead time 
The desired service level 
The average demand
48
Q

Curvy lines represent what in demand

A

Variability

49
Q

Higher z values lower

A

The probability of a stockout

50
Q

If given a standard deviation and calculating safety stock you need to

A

Square it to get the variance

51
Q

If given the variance when calculating safety stock

A

Do not square bc that is Sigma squared

52
Q

Where you are holding your inventory refers to

A

Inventory positioning

53
Q

Inventory positioning results in what two things

A

Increase in cost and decrease in flexibility

Flexibility would increase if you held inventory closer to where it’s being manufactured

54
Q

Inventory in the supply chain deals with

A

Inventory positioning

Transportation, Packaging and Material Handling Considerations

SCM Exam 3 (3 decks)

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