1. for operations
2. contribute to customer satisfaction 

• current assets 30%
• working capital invested in inventory 90%

1. raw materials
2. work in process
3. finished goods
4. tools and supplies
5. maitenence and repairs
6. goods in transit

• level of customer service
• costs of orders and carrying inventories

1. establish a system for tracking items in inventory
2. make decision about: 

• when to order
• how much to order

1. A system keep track of inventory
2. a reliable forecast of demand
3. knowledge of lead time and lead time variability 
4. reasonable estimates of :

•  holding costs
• ordering costs
• shortage costs

5. a classificatioin system for inventory items

• 10-20% of the items of inventory
• 60-70% of the annual dollar value

1. only one product is involved
2. annual demand requirements are known
3. demand is even throughout the year 
4. lead time does not vary
5. each other is recieved in a single delivery
6. there are no quantity discounts

1. the rate of demand
2. lead time
3. extent of demand and or lead time variabilty
4. the degree of stock out risk acceptable to management

ROP (reorder point)= d (times) _______

Under ceertainty

ROP 

under uncertainty

1. the adverage demand rate and average lead time
2. demand and lead time variability
3. the desired service level

• record keeping
• records and data must be accurate and up to date

1.       When Rosignol, a maker of snow skis, keeps the production quantity steady during May, June, and July even though sales are lower than production, Rosignol’s resulting inventory is described as

1.       In a softball glove manufacturing facility, Big Jim Chrisman runs the machine that sews the leather together.  Stevie-Jo Taylor runs the next operation which involves stamping the company logo on the glove.  Big Jim’s machine is old, worn out, and breaks down daily.  Management lets the WIP build up between their operations so Stevie-Jo will always have something to work on, even when Big Jim’s machine is down.  This build up  of inventory best describes which of the functions of inventory?

1.       When we hold inventory in excess of average demand to compensate for variability in demand, this inventory is best labeled as

1.       Inadequate inventory control may result in 

a.       The dollar value of inventory and the impact inventory has on daily operations

1.       Good inventory management is critical for most organizations because

a.       Finished good that are already sold and delivered

1.       All of the following are types of inventories EXCEPT

a.       30%;90%

1.       A typical firm has about  _______% of its current assets and as much as ________% of it’s working capital invested in inventory.

1.       Inventory items that are components of finished good demand are best described as 

1.       In inventory management, we try to successfully balance _________________ and __________________________.

1.       A ________________ inventory system is based on a physical count of inventory made at regular points in time.

1.       Perpetual Inventory systems still need a physical count to be accurate. True or False

1.       Time between placing an order and receiving the order is called

a.       Holding costs equal ordering costs

1.       If your EOQ= 502, total costs for the order will be at the point where

a.       To induce customers to buy in large quantities

1.       Supplies give quantity discounts to 

a.       Decreased, fewer, increased

1.       When quantity discounts are offered, the customer must weigh the potential benefits of _______________ purchase price and ______________ orders against ______________ carrying costs.

a.       Ordering costs

1.       Costs associated with preparing invoices, shipping costs, and inspection costs are called _____________.

a.       20;40

1.       Typically annual holding costs range from ________% to ________% of the value of the item.

a.       A classification system

1.       If we have some inventory items that are very, very expensive, while other items may be used a lot but represent a very small expense, we may need _____________ to determine the types of control we should use.

a.       Minimizes total costs

1.       When using EOQ, with or without quantity discounts our goals is to ALWAYS find the quantity that

a.       EOQ; ROP

1.       _______ tells us how much to order and _______  tells us when to order.

a.       Rate of demand

b.      Lead time

c.       Lead time variably

d.      Holding costs

1.       All of the following are determinants of ROP quantity EXCEPT

a.       Service level

1.       The probability that demand will not exceed supply during lead time is called

1.       ROP models require a ________ inventory system.

1.       An inventory decision rule states “when the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered.” Which of the following statements is true?

a.       Define what is to be controlled

1.       The first thing we should do in the control process is 

a.       Random variation

1.       Slight variations from the standard that do not negatively affect the quality of the product are called: 

a.       Before a costly operation

b.      Before an irreversible process

c.       Before a covering process

d.      After a costly operation

a.       The process is in control

1.       On your control charts in SPC, if you find no out- of- control signals, you should assume:

1.       A process that is functioning as it should will yield output that conforms exactly to our quality standard.   True or False

a.       95; normal

1.       Tschebysheff’s Theorem tells us that ___% of our data points will fall vithin 2 standard deviation of the mean, for a ________ distribution of data. 

a.       Tschebysheff’s theorem

1.       When we take 25 samples from our process and calculated the mean of each sample, the resulting distribution is called:

a.       Control charts

1.       ________________ are time ordered plots of sample statistics used to distinguish between random and non-random variation.

a.       Are causes of variation that can be identified and removed

1.       Assignable causes

a.       Averages of small samples

1.       Control charts for variables are based on date that come from

a.       Attribute inspection

1.       The type of inspection that classifies items as being either good and defective is 

a.       22.70 to 23.30 ounces

1.       If x bar – bar =23 ounces, and sigma= 0.4 ounces and n=16, the plus or minus 3 standard deviation control limits will be __________.

a.       Safety stock

1.       In a 2-bin inventory system the amount contained in the second bin is equal to the : 

1.       Specification for a pipe include the pipe diameter should measure between 25 and 27cm.  The pipe production process has a mean of 26cm and a standard deviation of .6 cm and follows a normal distribution. What %tage of pipes will not meet the specs?