Term
| 1. Organizations generally accumulate different inventories in different areas to satisfy each inventory function (pg A‐3). |
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Definition
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Term
2. Which category of inventory refers to daily use items and is
not going to become part of the final item? (pg A‐2) |
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Definition
A. supplies (CORRECT)
B. raw materials
C. spares
D. work in process
E. bits and pieces |
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Term
3. What is the name of the inventory used for normal, routine
operations of the organization (pg A‐3)? |
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Definition
A. cycle stock (CORRECT)
B. pipeline stock
C. decoupling stock
D. safety stock
E. seasonal stock |
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Term
4. What is the name of the inventory that is a hedge against
unfavorable fluctuations in lead time or demand (pg A‐4)? |
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Definition
A. cycle stock
B. pipeline stock
C. decoupling stock
D. safety stock (CORRECT)
E. seasonal stock |
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Term
5. The cost to hold one unit for one year can cost up to 40% of
the inventory’s value (pg A‐11). |
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Definition
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Term
6. Which forecasting model is based on intuition and not easily
reproducible (pg A‐28)? |
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Definition
A. subjective (CORRECT)
B. deterministic
C. causal
D. ad‐hoc
E. time series |
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Term
| What is the definition of inventory, according to logistics managers? |
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Definition
o a stock of goods or material on hand and being held for
some end purpose, such as use, transformation, transfer, or sale,
ultimately to satisfy a customer. |
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Term
| What are the 6 different categories of inventory? |
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Definition
1. Stock of supplies: daily use of materials required in an organization (to run the business), they are not items that will be included into a final product.
2. Raw materials: these are the materials that will be changed into a final item
3. Bits and pieces: are the materials used to repair equipment. They do not become part of the final product just the equipment that produces the final products. They are different from supplies in that they are only used when required not daily
4. Spares/components: are different from bits and pieces in that it can be changed from an old part to a new part on equipment. Ex black box.
5. Work-in-progress: products that are partially finished that are awaiting to be fully assembles
6. In-process goods or finished goods held: as it sounds finished ready to sell
How is each one different than the others? |
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Term
| What are the 9 different functions of inventory? |
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Definition
1. Cycle or working stock.
o inventory acquired and held in advance
of routine requirements
2. Speculation stock.
o Stock acquired by a company in anticipation of more favorable conditions.
3. Pipeline stock.
o Materials from the suppliers in a transit state
4. Work-in-process stock.
o Being assembled or transformed
S. Decoupling stock.
o Invetory that is accumulated between dependent activities in an operation
6. Psychic stock.
o Stock that is used in retailing businesses for display
7. Promotional stock.
o Inventroy so a firm can respond quickly and effectively to promotions
8. Safety stock.
o Inventory to deal with unfavorable ship times and/or changes in demand
9. Seasonal stock.
o Inventory which can only be acquired or sold at a particular time of year. |
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Term
| What are the 6 reasons to hold raw materials inventory (the in-bound side)? |
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Definition
1. Take advantage of possible quantity discounts that may be available from the supplier
2. Cheaper transportation
3. Prevent work stoppage
4. Allows firm to produce seasonal items year round
5. Speculation
6. Protect supply chain sources (ie buy more to keep them in business) |
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Term
| What are the 5 reasons for holding inventory on the out-bound side? |
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Definition
1. Hold enough to ship TL
2. Creating a little more to have longer runs to save on line changeover costs etc
3. Seasonal items
4. To provide a greater degree of customer service. Make sure the item is in stock.
5. Provide stable employment |
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Term
| Why is it important to study inventory management? |
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Definition
o To help a firm better manage it’s inventories
because it will help the firm better manage its inventory
1. Costs .
2. High percentage of the GNP tied up in inventory.
3. Level of customer service directly tied to level of
inventory held.
4. Market share often dependent upon level of inventory.
5. A firm's continued existence often depends on proper
levels of inventory.
6. Literally a matter of l i f e or death - both for bus ine s s
and for the society in the United States as a whole . |
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Term
| What is meant by the phrase “improper inventory levels”? |
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Definition
It does not mean too much or too little, but not what the customer requires
Biggest single reason businesses go out of business |
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Term
| What are the 4 most relevant costs of inventory? |
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Definition
1. Purchase cost
2. Order set up cost
3. Holding cost
4. Stock-out cost |
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Term
| What 2 things can be considered purchase costs? |
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Definition
1. The cost of buying the item if purchased externally
2. The cost of producing the item if produced internally |
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Term
| What is included in order costs? |
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Definition
1. The cost of placing an order
2. Or the cost incurred in effecting a setup change in production |
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Term
| What is included in setup costs? |
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Definition
1. The costs to change the production process from one type product to another product.
2. Preparing shop order, scheduling the work, manpower costs to set up the new process, expediting if required, and quality inspections. |
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Term
| How much can it cost to hold one item for one year? |
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Definition
| 1. 20-40% of the inventory investment |
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Term
| What are the two kinds of stockout costs? |
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Definition
1. Costs from outside the organization if the shortage is in having finished product to meet customer demand
2. Or can come from within organization if the shortage is in not having sufficient raw materials to keep production operating. |
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Term
| Why are costs of loss sales so hard to calculate? |
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Definition
| o Because it involves lost future sales, which is difficult to assign a number to. What is the value of a customer? |
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Term
| What are the negative effects of poor inventory control? |
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Definition
o Create a negative cash flow
o Tie up large amounts of capital
o Reduce the return on investment by broadening the investment base. |
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Term
| What are the results of too much inventory? Too little inventory? |
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Definition
o Too much can result in unnecessary holding costs
o Too little can result in lost sales or disrupted production |
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Term
| When is it justified to hold inventory? |
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Definition
| 1. Only by the efficiency of operations it makes possible |
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Term
| What are the 3 main questions to be considered in inventory management? |
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Definition
1. How should inventory be monitored?
2. How much inventory should be ordered at one time?
3. When should orders for the item be placed? |
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Term
| What are the two options for monitoring inventory? |
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Definition
1. Monitor the item periodically
2. Monitor the item’s inventory level continuously |
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Term
| What is the major concern for period monitoring? |
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Definition
| o How often do we count or look at the on-hand balance? |
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Term
| What is enabling more companies to move to a continuous monitoring system? |
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Definition
| o Capabilities of Technology |
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Term
| Why is forecasting so important in inventory management? |
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Definition
| o Business is becoming more complex and comptetitive. |
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Term
| Why must inventory managers understand forecasting, regardless of computer technology? |
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Definition
| o Computers can only forecast accurately if managers are knowledgable of the capabilities and limitations of the particular forecast method that is stored in the computer memory. |
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Term
| What are the 5 categories of forecasting? |
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Definition
1. Subjective
2. Deterministic
3. Causal
4. Ad hoc
5. Time series (Box-Jenkins) |
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Term
| Which two are judgmental? What does that mean? |
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Definition
| 1. Subjective and Ad hoc. |
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Term
| Which two are relational? What does that mean? |
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Definition
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Term
| Which category is the most common in today’s business world? |
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Definition
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Term
Why are subjective models not reproducible?
Why are they often used for simple forecasting needs?
Why is it easy for this model to be misused? |
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Definition
o Since factors taken into account are unique to the individual forecaster
o Because it’s quick and uses intuitionon
Because two people would likely arrive at different conclusions |
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Term
| Despite using calculations, how are ad-hoc models based on judgment? |
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Definition
| o Because they lack a general methodology of selection among alternative schemes. No general concensus to determine parameter values. Forecaster can select any value within bounds to apply to the parameters |
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Term
| What is the relation used in deterministic models? |
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Definition
| o Long term time series are completely systematic and predictable. TIME |
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Term
| What is the relation used in causal models? |
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Definition
| o One variable or set of variables causes another variable to take on some particular value. |
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Term
| What are some patterns that can be observed by graphing time-series data? |
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Definition
o Trend that shows the overall movemnt in the data from beginning to end.
o Seasonal pattern
o Cyclical pattern |
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Term
| What are the type of patterns that can’t be seen |
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Definition
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