Inventory Management

Question 1

two goals of inventory management are

Answer 1

ensure adequate inventory to sustain operations

Minimize inventory costs

Question 2

What are the 2 levels of production pattern.

Answer 2

Level and Seasonal

Question 3

Pros and Cons of Level

Answer 3

Pros - results in the most efficient use of labor and facilities

Cons - inventory build up during slow sales. Additional inventory holding costs

Question 4

Pros and Cons of Seasonal

Answer 4

Pros - Increases production during peak demand and reduces during slow periods.

Cons - additional operating costs (overtime, maintenance)

Question 5

Inventory can be effected by Inflation/Deflation. What can a firm do to minimize the damage?

Answer 5

Hold low levels of inventory

Hedging future contracts to offset losses

Question 6

Economic Order Quantity

Answer 6

minimizes sum of carrying costs (indrease order size) and ordering costs (decrease order size)

Question 7

What are examples of Carrying Costs

Answer 7

Storage
Interest
Spoilage
Insurance
Property Taxes

Question 8

What are examples of Stockout Costs

Answer 8

1. Profit on lost sales
2. Customer ill will
3. Idle equipment
4. Work stoppages

Question 9

Materials Requirements Planning (MRP)

what is the weakness?

Answer 9

computerized system that manufactures finished goods based on demand forecasts.