Chapter 12

Question 1

Amazon.com started as a ____ retailer- no inventory, no warehouses, no overhead. Just computers taking orders to be filled by others.

Answer 1

Virtual

Question 2

Growth has forced Amazon.com to become a world leader in warehousing and ______ management

Answer 2

Inventory

Question 3

The objective of inventory management is to

Answer 3

Strike a balance between inventory investment and customer service.

Question 4

One of the most expensive assets of many companies representing as much as __% of total invested capital.

Answer 4

50

Question 5

Less inventory lowers ____ but increases chances of ____ ____

Answer 5

Cost; running out

Question 6

More inventory ____ costs but always keeps customers happy.

Answer 6

Raises

Question 7

4 functions of inventory:
1. To provide a selection of goods for ____ demand and to separate the firm from fluctuations in _____

2. To decouple or separate various parts of the ____ process.

Answer 7

Anticipated, demand. Production process

Question 8

4 functions cont.
3. To take advantage of ____ discounts

4. To hedge against ____

Answer 8

Quantity, inflation

Question 9

4 types of inventory:

Answer 9

Raw material, work in process, maintenance/repair/operating (MRO), and finished goods.

Question 10

Type of inventory that is purchased but not processed.

Answer 10

Raw materials

Question 11

Type of inventory that has undergone some change but not completed. A function of cycle time for a product.

Answer 11

Work in process (WOP)

Question 12

Type of inventory that is necessary to keep machinery and processes productive

Answer 12

Maintenance/repairing/operating (MRO)

Question 13

Type of inventory that is a completed product awaiting shipment.

Answer 13

Finished goods.

Question 14

The material flow cycle: input, wait for inspection, wait to be moved, move time, wait in queue for operator, and setup time counts for ___% of cycle time. ___% is run time and to output.

Answer 14

95, 5

Question 15

Managing inventory involves 2 things:

1. How inventory items can be _____ (ABC analysis)
2. How accurate inventory records can be _____

Answer 15

Classified, maintained.

Question 16

Divides inventory into three classes based on annual dollar volume. Used to establish policies that focus on the few critical parts and not the many trivial ones.

Answer 16

ABC analysis

Question 17

Class ___: high annual dollar volume

Class ___: medium annual dollar volume

Class ___: low annual dollar volume

Answer 17

A,B,C

Question 18

Other criteria than annual dollar volume may be used for ABC analysis:

High shortage or ___ cost
Anticipated engineering changes
Delivery problems
____ problems

Answer 18

Holding, quality.

Question 19

______ _____ are a critical ingredient in production and inventory systems.

Answer 19

Record accuracy

Question 20

____ ____ require regular checks of inventory which is also called a ___ ___ system.

Answer 20

Periodic systems. Two bin

Question 21

Perpetual inventory tracks receipts and subtractions on a ___ basis.

Answer 21

Continuing

Question 22

____and ____ record keeping must be accurate. Necessary to make precise decisions about ordering, scheduling and _____

Answer 22

Incoming and outgoing; shipping

Question 23

Items are counted and records updated on a periodic basis. Often used with ABC analysis.

Answer 23

Cycle counting

Question 24

Cycle counting has several advantages:

1. Eliminates shutdowns and interruptions
2. Eliminates annual ____ _____
3. Trainee personnel audit inventory accuracy
4. Allows causes of errors to be identified and corrected
5. Maintains accurate inventory records

Answer 24

Inventory adjustment

Question 25

Control of ____ inventories:

• can be a critical component of profitability
• losses may come from shrinkage or pilferage
• applicable techniques include:
  1. Good personnel selection, training and discipline.
  2. Right control of incoming shipments
  3. Effective control of all goods leaving facility

Answer 25

Service

Question 26

The demand for item is independent of the demand for any other item in inventory

Answer 26

Independent demand

Question 27

Demand for item is dependent upon the demand for some other item in the inventory.

Answer 27

Dependent demand

Question 28

Costs of holding or “carrying” inventory over time

Answer 28

Holding costs

Question 29

Costs of placing an order and receiving goods.

Answer 29

Ordering costs

Question 30

Cost to prepare a machine or process for manufacturing an order

Answer 30

Setup cost

Question 31

3 inventory models under independent demand:

1. Basic EOQ model
2. Production order ___ model
3. Quantity ____ model

Answer 31

Quantity

Question 32

Important assumptions for EOQ model:

1. Demand is known, constant and independent.
2. Lead time is known and constant
3. Receipt of inventory is instantaneous and complete
4. Quantity discounts are not possible
5. Only _____ costs are setup and holding
6. Stockouts can be completely _____

Answer 32

Variable, avoided