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SCM 352 > Exam 2 - Chapter 11 > Flashcards

Exam 2 - Chapter 11 Flashcards

1
Q

Inventory Management

[Test Question]

A

Inventory Management: involves planning and controlling the acquisition, storage, movement, and distribution of raw materials, subassemblies, and finished goods.

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2
Q

The primary functions of inventory are to

[Test Question]

A

The primary functions of inventory are to:

  • Buffer uncertainty in the marketplace
  • Decouple dependencies in the supply chain
  • Geographically separate production from consumption, Stored capacity (production, but not services)
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3
Q

Types of Inventories

[Test Question]

A
  • Raw materials
  • Work in process (WIP)
  • Finished goods
  • Maintenance, Repair, and Operating (MRO)
  • Cycle inventory (order or lot size inventory)
  • Safety stock
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4
Q

Raw materials:

[Test Question]

A

Raw materials, component parts, subassemblies, and supplies are inputs to manufacturing and service-delivery processes.

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5
Q

Work-in-process (WIP)

[Test Question]

A

Work-in-process (WIP) inventory consists of partially finished products in various stages of completion that are awaiting further processing.

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6
Q

Finished goods

[Test Question]

A

Finished goods inventory is completed products ready for distribution or sale.

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7
Q

Maintenance, Repair, and Operating (MRO)

[Test Question]

A

Maintenance, Repair, and Operating (MRO) supplies are items used in operations but do not become parts of the finished goods, such as lubricants and cleaning supplies.

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8
Q 
Cycle inventory (order or lot size inventory)
[Test Question]
A

Cycle inventory (order or lot size inventory) is inventory that results from purchasing or producing in larger lots than are needed for immediate consumption/sale.

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9
Q

Safety stock

[Test Question]

A

Safety stock inventory is an additional amount of inventory that is kept over and above the average amount required to meet demand.

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10
Q

Keeping a lot of inventory is not _____ _____

A

value adding

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11
Q

Should you have more inventory than you forecasted?

A

Yes, even it’s not value adding you can’t always perfectly forecast how much inventory you will need in the future. Therefore, you need to store a lot of inventory as you might need it in the future

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12
Q

Inventory management is the most _____ thing for companies to manage

A

difficult

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13
Q

Make sure you know difference between Maintenance, Repair, and Operating (MRO) and raw material
[Test Question]

A

Raw materials, component parts, subassemblies, and supplies are inputs to manufacturing and service-delivery processes.

Maintenance, Repair, and Operating (MRO) supplies are items used in operations but do not become parts of the finished goods, such as lubricants and cleaning supplies.

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14
Q

Cycle inventory example:

A

toilet paper

- you buy more than u need

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15
Q

Absolute Value of Inventory

[Test Question]

A
  • can be determined by annual stock counts
  • report on the balance sheet
    (class note:- how much you invest in your inventory)
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16
Q

Inventory Turnovers or Inventory Turnover Ratio

[Test Question]

A
  • how many times inventory “turns” in an accounting period

- faster is better, suggesting the firm is able to generate more revenue per $ in inventory investment

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17
Q

Inventory turnovers=
(formula)
[Test Question]

A

Cost of revenue
_______________
Average Inventory

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18
Q

Can you compare automobiles to Walmart

A

No you can’t
You can’t compare apples to oranges.
Therefore, make sure you compare automobile with automobiles

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19
Q

________ can be one of the most expensive assets of an organization

A

inventory

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20
Q

Make sure to go on slide 5 and look at the math on how to calculate inventory turnover as he said there will be a test over it
[Test Question]

A

(Chapter 11- Slide 5)

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21
Q

Inventory managers deal with two fundamental decisions – ____ and _____ ______ to order or produce.

A

when; how much

22
Q

Four categories of inventory costs:

[Test Question]

A
  1. Ordering or setup costs
  2. Inventory-holding or carrying costs
  3. Shortage or stockout costs
  4. Unit cost of the stock-keeping units (SKUs)
23
Q

Ordering or setup costs:

[Test Question]

A

Ordering or setup costs
These costs are incurred as a result of the work involved in placing purchase orders with suppliers or configuring tools, equipment, and machines within a factory to produce an item.

24
Q

Inventory-holding or carrying costs:

[Test Question]

A

Inventory-holding or carrying costs

These costs are the expenses associated with carrying inventory, such as storage, insurance, spoilage, shrinkage.

25
Q

Shortage or stockout costs

[Test Question]

A

Shortage or stockout costs

These costs are the costs associated with a SKU being unavailable when needed to meet demand.

26
Q

Unit cost of the stock-keeping units (SKUs)

[Test Question]

A

Unit cost is the price paid for purchased goods or the internal cost of producing them.

27
Q

Ordering cost

A

time it takes to order from suppliers

28
Q

Setup cost

A

time it takes to setup the product

29
Q

Ordering or setup costs and inventory-holding or carrying cost are _____ related

A

inverserly

30
Q

SKU

A

stock keeping units
identifies the model of the product

it does NOT identify specific products

31
Q

Independent demand:

[Test Question]

A

is demand for an SKU that is unrelated to the demand for other SKUs and needs to be forecast – EOQ.

AKA a finish good or service part

32
Q

Dependent demand:

[Test Question]

A

Dependent demand is demand directly related to the demand for other SKUs and can be calculated without needing to be forecast – MRP.

AKA the demand for component parts. you know exactly what you need

33
Q

Deterministic demand:

A

Deterministic demand is when uncertainty is not included in its characteristics.

34
Q

Stochastic demand:

A

Stochastic demand incorporates uncertainty by using probability distributions.

  • in n out example depends on ur mood when u want a hamburgererer
35
Q

Static demand:

A

Static demand is stable demand, whereas Dynamic demand varies over time.

36
Q

A stock-keeping unit (SKU):

A

A stock-keeping unit (SKU) is a single item or asset stored at a particular location.

37
Q

A SKU is a:

A

A SKU is a number (or string & number) that uniquely identifies a product.

38
Q

The lead time:

A

The lead time is the time between placement of an order and its receipt.

39
Q

Lead time example

A

how long it takes for amazon to ship a product

40
Q

stockout:

A

A stockout is the inability to satisfy demand for an item. When a stockout happens, the item is either back-ordered or a sale is lost.

41
Q

backorder:

A

A backorder occurs when a customer is willing to wait for an item.

42
Q

lost sale:

A

A lost sale occurs when the customer purchases the item elsewhere.

43
Q

Selling a Ford Truck
Truck
Tire

Which is the Independent demand and Dependent demand

[Test Question]

A

Independent demand
truck

Dependent demand
Tire

44
Q

Independent demand

A

demand for the finish good and the service part

45
Q

Dependent demand

A

demand for the independent demand part

46
Q

After few years from buying the Ford Truck you need 5 more tires because they are broken. What would you consider the tires to be?
A. Independent demand
B. Dependent demand

A

A. Independent demand

47
Q

ABC inventory/ABC analysis

A

managing your suppliers/customers into multiple classifications. You focus on managing group A since it 80%. B are the second important. C is the last group

48
Q

Economic Order Quantity model

A

The purpose is to determine the optimal order quantity

49
Q

Replenishment is instantaneous (Test Question)

A

suppliers supply the exact amount no more or no less.

50
Q

Quantity discount Model

A

Relaxed constant price assumption

51
Q

Economic Quantity Model

A

Relaxed the instantaneous replenishment

SCM 352 (20 decks)

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