Terms and definitions

Question 1

Anticipation inventory

Answer 1

Extra inventory to account for increased sales

Question 2

Safety stock

Answer 2

Extra inventory to account for fluctuations in demand during lead time

Question 3

Lot-size inventory or cycle stock

Answer 3

Purchasing or manufacturing inventory in quantities greater than needed

Question 4

Buffer inventory

Answer 4

Extra inventory to maintain throughput

Question 5

Decoupling

Answer 5

Extra inventory to account for supplier fluctuations

Question 6

Describe the 3 levels of the ABC Classification, the % of $ value and % of # of items

Answer 6

Class A: 80% of value is found in 20% of items
Class B: 15% of value is found in 30% of items
Class C: 5% of value is found in 50% of items

Question 7

Acquisition cost

Answer 7

Product cost or purchase price

Question 8

Landed cost

Answer 8

Acquisition cost plus logistics cost ie. warehousing, transportation and handling fees

Question 9

Carrying costs (holding costs) include which 3 inventory costs?

Answer 9

Storage costs, Capital costs, Risk costs

Question 10

Ordering costs

Answer 10

Costs associated with the frequency of ordering ie. clerical work and physical handling of goods

Question 11

Lot-for-lot

Answer 11

Generates planned orders in quantities equal to net requirements (unfulfilled demand) in each period.

Question 12

Fixed order quantity

Answer 12

Ordering pre-determined quantities

Question 13

EOQ

Answer 13

Calculated version of Fixed order quantity. The qty where carry costs = order costs

Question 14

Order point system

Answer 14

Order inventory when on hand inv = demand during lead time + safety stock

Question 15

Periodic review system

Answer 15

Order inventory in fixed intervals, ie. weekly, monthly, etc.

Question 16

Min-max order point system

Answer 16

Orders are submitted after it has fallen below the min point, but inventory cannot go over the max point

Question 17

Time-phased order point system

Answer 17

TPOP checks whether inventory will fall below the order point during the order horizon

Question 18

Demand-driven material requirements planning system

Answer 18

Dynamically determines the best places to position inventory and dynamically adjusts the size of buffer inventories

Question 19

Inventory accuracy

Answer 19

On-hand inventory is within an allowed tolerance (range) of the recorded (system) balance. % of items with inventory levels that fall within tolerance

Question 20

Periodic counting

Answer 20

Count once a year

Question 21

Cycle counting

Answer 21

Inventory is counted on a cyclical schedule