CPIM Part 2, Module 5 - Inventory Flashcards
What are the four purposes of inventory management?
- Better customer service
- Greater operating efficiency
- Longer production runs
- Volume purchases
What are the five stages of inventory over time?
- Operating inventory
- Excess inventory
- Inactive inventory
- Obsolete inventory
- Scrap
When is inventory inactive?
When it has not been used for a defined period
When is inventory excess?
When it is more than the minimum amount needed
What is distressed inventory?
Products that are damaged or close to their expiration date
When is inventory obsolete?
When it has met the obsolescence criteria
What is aggregate inventory management?
Establishing the overall level (dollar value) of inventory desired and implementing controls to achieve this goal
What four goals drive an organization’s inventory policy?
- Customer service
- Operational efficiency
- Financial return on investment
- Environmental impact
Which three issues could arise with a push system for managing the inventory in the distribution channel / supply chain?
- The bullwhip effect
- Higher risk of obsolescence
- Poor customer service levels
For which three types of goods is the order point method used for replenishment? And which one specially not?
- High-volume goods with independent demand
- Dependent demand items with stable and continuous demand
- MRO supplies when lot sizes are constrain by supplier
- NOT for A items (because of inventory costs)
When can a periodic review replenishment method best be used?
- The goal is to lower ordering costs
- For multiple low-value items that are depleting at different rates
- When economical truck loads can be created
What is the major precaution in a periodic review replenishment method?
To ensure that an item’s total inventory is sufficient to cover demand during both the review period as well as the lead time
For which type of items is a visual review (two-bin) system used for replenishment?
For items with both dependent and independent demand but typically for lower-valued (C) items
When can a kanban system be used for replenishment?
For dependent demand items in lean production
In order to use the EOQ method for replenishment four assumptions have to apply, which ones are these?
- Demand is constant
- The item is produced in batched or lots
- Ordering and inventory costs are constant and known
- Replenishment occurs all at once
What does the itemized inventory policy do?
It provides constraints on the upper and lower limits of an items inventory amount.
- Upper limit controls costs
- Lower limit controls stockout costs
Which three methods can be used to determine lot size?
- Lot-for-lot
- Fixed order quantity
- Order n periods
In what four types of situations is L4L used?
- In planning and fulfilling time-phased requirements for dependent demand items in MRP and for independent demand items in MPS
- When ordering or making inexpensive or infrequently used items
- When ordering perishable items where there is the risk of loss due to expired shelf life
- In lean, to reduce waste
There are five factors that determine the amount of safety stock, which five are these?
- The degree of variability in demand
- Forecast error
- Order frequency
- Service level
- Lead time
The first step of the statistical method approach to calculating safety stock is to calculate the degree to which demand can be expected to fluctuate. In what three ways can this be done for the different methods?
- Standard deviation of actual demand from average demand
- Root mean squared error (RMSE) of actual demand from forecast demand
- Mean absolute deviation (MAD) of actual demand from forecast demand
What is the difference between using SD vs RMSE for calculating safety stock?
SD measures the volatility of demand but does not address the reliability of the forecast. RMSE was developed to account for forecast reliability
What is time period safety stock?
It provides an even amount of safety stock, equal to the estimated usage over a designated time frame. The safety stock varies with change in demand
When is the fixed order safety stock used?
When to plan safety stock quantities for parts that require special oversight. For example when transitioning in and out of use
What are maintenance, repair and overhaul items?
Items for reprocessing in the manufacturing industry
What is mean time between failures (MTBF)?
The average time interval between failures for repairable products for a defined unit of measure
What is mean time to failure (MTTF)?
The average time for failure of a nonrepairable product (expected life) or average time to first failure of a repairable product
What is mean time to repair (MTTR)?
The average time that it takes to repair a product
What three costs are included in carrying costs?
- Capital costs
- Storage costs
- Risk costs
What is landed costs?
The product cost + the cost of logistics, such as warehousing, transportation, and handling fees
Total costs are the sum of which three costs?
- Carrying costs
- Ordering costs
- Stockout costs
What is risk pooling?
A method associated with the management of inventory risk. In risk pooling an organization centralizes its inventory. Demand from various sources is aggregated, so reduced variability in demand and improved forecasting
Inventory is often grouped in storage based on certain principles, which four are these?
- Items are functionally related
- Fast-moving items are stored together
- Items with similar storage needs are stored together
- Working stock and reverse stock are separated
Tasks associated with managing inventory responsibility and control by suppliers can be done in four forms, which are these?
- Rapid replenishment strategies
- Continuous replenishment strategies
- Vendor-managed inventory (VMI) strategies
- Consignment
What entails a rapid replenishment strategy?
Data from the customer (point of sale or orders) are used to align supplier’s production schedule. Customer still makes orders
What entails a continuous replenishment strategy?
The supplier assumes responsibility for tracking customers inventory levels and replenishing items in a way that meets agreed service levels but without customer orders
What is a vendor managed inventory strategy?
The supplier performs some of the tasks associated with the itemized inventory policy. Customer has to share data on demand. Vendor assumes responsibility.
What is a consignment strategy?
A vendor holds inventory at the supplier location and only charges at use
What are the three levels of traceability? from high level to low level.
- Class
- Batch/lot
- Instance
What are the four purposes that a ASN serves?
- It provides a time for arrival
- It allows consignee time to arrange delivery appointment
- It enables the consignee to redeploy the shipments contents
- Can reduce uncertainty in order replenishment
What are the six steps in the waste hierarchy from most sustainable -> least sustainable?
- Avoid
- Reduce
- Reuse
- Recycle
- Recover
- Dispose
What is the Kobe 3R action plan?
A plan from environment ministers from G8 countries to decouple resource consumption and environment degradation associated with economical activities. It stands for Reduce, reuse, recycle
What is the total cost of ownership in supply chain?
The sum of all the costs associated with every activity of the supply chain
What are the four steps of the reverse logistics process?
Step 1. The product is retrieved
Step 2. The product is transported to a receiving center
Step 3. The product is logged in, inspected and sorted
Step 4. The product is handled according to disposition protocol
What is a material review board (MRB)?
A board or committee that sets the policy regarding disposition and determines the resolution or disposition of items that have questionable quality or other attributes
What are the six ways a dispositioned item can be handeld?
- Return to stock
- Return to manufacturer
- Liquidate
- Donate
- Recycle
- Dispose
What are the four costs included in product disposition?
- Return goods handling
- Returns inventory costs
- Return processing costs
- Return disposal costs
