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Supply Chain Management > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

Proactive approach to controlling inventory levels and aligning them with the demands of your supply chain

A

Strategic inventory management

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2
Q

A collection of stored goods where the primary rationale is rooted in the strategic interaction among involved parties within a supply chain

A

Strategic inventory

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3
Q

A crucial aspect of supply chain strategy, involving the careful planning, control and optimization of inventory levels to support the overall strategic goals of an organization

A

Strategic inventory management

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4
Q

It includes all the materials and goods that are purchased, partially completed materials and component parts, and the finished goods produced

A

Inventory

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5
Q

The two primary functions of inventory are

A

-To buffer uncertainty in the marketplace
-To decouple (break the dependencies between stages in the supply chain)

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6
Q

It can be used to cushion uncertainties due to fluctuation in supply, demand, and/or delivery lead time.

A

Safety stock or buffer stock

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7
Q

ToF. Planning the amount of inventory usually results to work center operation interruption, due to processing data and ensuring supplier-customer relationship.

A

False

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8
Q

ToF. Keeping the correct amount of inventory at each work center allows a faster work center to operate smoothly when it is constrained by slower upstream work centers

A

True

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9
Q

This concept is used by organizations in the developing countries to specialize in cheap labor and abundant raw materials whereas the manufacturing firms provide the technology and capital to produce goods

A

Geographical specialization

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10
Q

These are unprocessed purchased inputs or materials for manufacturing the finished goods

A

Raw materials

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11
Q

It becomes a part of the finished goods after the manufacturing process is completed

A

Raw materials

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12
Q

It describes materials that are partially processed but not yet ready for sales

A

Work in process

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13
Q

These are completed products ready for shipment

A

Finished goods

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14
Q

Are often kept to buffer against unexpected demand changes and in anticipation of production process downtime

A

Finished goods inventories

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15
Q

These are materials and supplies used when producing the products but are not parts of the products

A

Maintenance, Repair, and Operating (MOR) supplies

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16
Q

The two main reasons for storing MRO supplies are:

A
  • to gain purchase economies
  • to avoid materials shortage that may shut down production
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17
Q

It is the internal demand for parts based on the demand of the final product in which the parts are used

A

Dependent demand

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18
Q

What are the examples of dependent demand items

A
  • subassemblies
  • components
  • raw materials
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19
Q

ToF. Independent demand may have a pattern of abrupt and dramatic change because of its dependency on the demand of the final product, particularly if the product is produced in large lot sizes

A

False

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20
Q

It can be calculated once the demand of the final product is known

A

Dependent demand

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21
Q

It is the demand for a firms and products that has a demand pattern affected by trends, seasonal patterns, and general market conditions

A

Independent demand

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22
Q

ToF. The customer demand for all-terrain vehicles is an independent demand

A

True

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23
Q

ToF. Batteries, headlights, seals and gaskets originally used in assembling all-terrain vehicles are also an independent demand

A

False

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24
Q

It cannot be derived using the material requirements planning logic from the demand for other items and, thus, must be forecasted based on the market conditions

A

Independent demand items

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25
Q

ToF. Independent demand and dependent demand is both uncertain

A

False

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26
Q

Types of strategic inventories

A

Safety stock
Anticipation inventory
Hedge inventory
Decoupling inventory
Cycle stock

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27
Q

It mitigates the effect of unexpected demand or supply shortage, prevents the stockouts and maintains customer satisfaction

A

Safety stock

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28
Q

It provides a consistent service amidst supply and demand uncertainties

A

Safety stock

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29
Q

This inventory caters to predictable often seasonal demand spikes to ensure the production process remains uninterrupted and customer needs are met during peak seasons

A

Anticipation inventory

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30
Q

It protects against price fluctuations and supply disruptions

A

Hedge inventory

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31
Q

It aids in price stabilization and ensure supply continuity against market uncertainties

A

Hedge inventory

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32
Q

It allows production stages to operate independently, reducing lead times and downtimes

A

Decoupling inventory

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33
Q

It enhances operational efficiency and timely product delivery

A

Decoupling inventory

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34
Q

It supports daily operations ensuring a steady products supply

A

Cycle stock

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35
Q

It facilitates in uninterrupted operations and consistent service delivery

A

Cycle stock

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36
Q

The importance of strategic inventory

A

Risk mitigation
Customer satisfaction
Cost efficiency
Operational efficiency
Market responsiveness

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37
Q

Strategic inventory guards against unexpected supply chain disruptions to ensure business continuity and prevent revenue losses

A

Risk mitigation

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38
Q

A well maintained inventory ensure product availability to enhance customer experience and build loyalty

A

Customer satisfaction

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39
Q

Strategic inventory helps in controlling cost to enable bulk purchasing and volume discounts

A

Cost efficiency

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40
Q

Decoupling inventory boost production efficiency and reduces lead times it ensures that production schedules are met and product and customer demands are addressed quickly

A

Operational efficiency

41
Q

A strategy inventory ensures swift adaptation to market changes and trends it also provides a competitive edge and enhances market agility

A

Market responsiveness

42
Q

Steps in strategic inventory process

A
  1. Demand forecasting
  2. Safety stock calculation
  3. Supplier relationships
  4. Order quantities
  5. Inventory turnover ratio
  6. Technology integration
  7. Continuous review
  8. Disaster preparedness
43
Q

It is essential to predict the quantity of products required to meet customer demand

A

Forecasting

44
Q

Forecasting is essential to predict the quantity of products required to meet customer demand. Accurate forecast aid in making informed decisions on ordering and stocking inventory

A

Demand forecasting

45
Q

This step involves determining the optimal level of safety stock to handle unexpected demand spikes or supply delays, it serves as a buffer to mitigate stuck out and maintain customer service levels

A

Safety stock calculation

46
Q

Building and maintaining relationship with suppliers ensures a steady, reliable supply of inventory. Good relationships can lead to favorable terms, quality assurance, and timely deliveries

A

Supplier relationships

47
Q

Determine the optimal order quantities to minimize cost associated with ordering, holding, and stockouts. This involves a balance approach to avoid overstocking or understocking.

A

Order quantities

48
Q

Analyze the frequency at which the inventory is sold and replaced a higher turnover ratio indicates efficient inventory management and sales processes

A

Inventory turnover ratio

49
Q

Incorporating technology solutions for real time tracking data analysis and automation. This enhances the efficiency accuracy and speed of the inventory management

A

Technology integration

50
Q

Regularly review inventory levels, demand forecast, and supplier performance. Adapt the strategy as needed to optimize inventory management

A

Continuous review

51
Q

Prepare for unforeseen challenges like natural disasters, supply failures, or abrupt market changes. This involves in contingency planning and risk management strategies

A

Disaster preparedness

52
Q

It can be broadly defined as “the activity of checking a shop’s stock”

A

Inventory control or stock control

53
Q

Refers to the systematic location storage and recording of goods in such a way that desire degree of service may be rendered to operating shops at minimum ultimate cost

A

Inventory control

54
Q

It is also concerned with the systematic receipt, storage disbursement, and recording of materials in such a way that provides the required degree of service in the firm at minimum possible cost

A

Inventory control

55
Q

Is a discipline primarily about specifying the shape and placement of stock goods

A

Inventory management

56
Q

It is required at different locations within a facility or within many location of the supply network to precede regular and planned course of production and stock materials

A

Inventory management

57
Q

Involves the planning control and optimization of the storage movement in the availability of goods within an organization

A

Inventory management

58
Q

It place a critical role in balancing the need to beat customer demand with the necessity of minimizing holding cost

A

Inventory management

59
Q

ETD means

A

Estimated time of departure

60
Q

ETA means

A

Estimated time of arrival

61
Q

What are the two main concerns of inventory management

A
  • Level of customer service
  • Cost of ordering and carrying inventory
62
Q

ToF. Inventory management is important to successful operation for most organizations because of the amount of money invested in inventory represents in the impact that inventories have on a daily operations of an organization

A

True

63
Q

Requirements of effective inventory management

A
  1. A system to keep track of inventory
  2. A reliable forecast of demand
  3. Knowledge of lead times and lead time variability
  4. Reasonable estimates of holding cost, ordering cost, shortage cost
  5. A classification system
64
Q

It includes the cost to order and hold inventory as well as to administer the related paperwork

A

Inventory cost

65
Q

Discuss is examined by management as part of its evaluation of how much inventory to keep on hand

A

Inventory cost

66
Q

Classification of inventory cost

A

Direct cost
Indirect cost
Fixed cost
Variable cost
Order or set up cost
Holding or carrying cost
Setup cost
Stock out cost

67
Q

Those that are directly traceable to the unit produced such as the amount of materials and labor used to produce a unit of the finished goods

A

Direct cost

68
Q

Those that cannot be traced directly to the unit produced and they are synonymous with manufacturing overhead

A

Indirect cost

69
Q

Are independent of the output quantity

A

Fixed cost

70
Q

Changes as a function of the output level

A

Variable cost

71
Q

Are the direct variable cost associated with placing an order with the supplier

A

Order or setup cost

72
Q

Are the cost incurred for holding inventory in storage

A

Holding or carrying cost

73
Q

Are used in place for order cost to describe the cost associated with setting up machines and equipment to produce batch of product

A

Set up cost

74
Q

Cost occur whenever insufficient stock exist to fulfill replenishment order

A

Stock out cost

75
Q

Serves many important functions for manufacturing and service firms however excessive amount of it is detrimental to a firm’s financial health and competitive advantage

A

Inventory

76
Q

It requires storage spaces and then cares other carrying cost

A

Inventory

77
Q

It can also deteriorate quickly while it is in storage in addition it can become obsolete very quickly as new materials and technologies are

A

Inventory

78
Q

A widely used measure to determine how efficiently a firm is using its inventory to generate revenue

A

Inventory turnover ratio or inventory turnovers

79
Q

ToF. Higher turnovers are generally viewed as a negative trend because it indicates that the company loses more revenue per dollar in inventory investment

A

False

80
Q

ToF. Higher turnovers allow the company to increase cash flow and reduce warehousing and carrying cost

A

Inventory turnover ratio

81
Q

Model that is classic independent demand inventory system that provides many useful ordering decisions

A

Economic order quantity model

82
Q

It is the sum of the annual order cost and the annual inventory holding cost

A

Total annual inventory cost

83
Q

ToF. When the order size of an item is small orders have to be placed on a frequent basis causing low annual order cost

A

False

84
Q

What are the assumptions of economic order quantity model

A
  1. The demand is known in constant
  2. Order lead time is known and constant
  3. Replenishment is instantaneous
  4. Price is constant
  5. Holding cost is known and constant
  6. Order cost is known and constant
  7. Stockouts are not allowed
85
Q

TAIC

A

Total annual inventory cost

86
Q

APC

A

Annual purchase cost

87
Q

AHC

A

Annual holding cost

88
Q

AOC

A

Annual order cost

89
Q

R

A

Annual requirement or demand

90
Q

C

A

Purchase cost per unit

91
Q

S

A

Cost of placing one order

92
Q

k

A

Holding rate

93
Q

Q

A

Order quantity

94
Q

EOQ formula

A

EOQ=sqrt((2RS)/(kC))

95
Q

Formula for annual purchase cost

A

R × C

96
Q

Formula for annual holding cost

A

Q×kC/2

97
Q

Formula for annual order cost

A

R×S/Q

98
Q

Formula for total annual inventory cost

A

Annual purchase cost + annual holding cost + annual order cost

99
Q

Formula for reorder point

A

Daily demand × Lead time

Supply Chain Management (6 decks)

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