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OMGT 6213 Final Exam Questions with Latest Update
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OMGT 6213 Final Exam Questions with Latest Update
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OMGT 6213 Final Exam Questions withLatest Update
What is inventory? - Answer-Stocks or items used to support production (raw materials
and work in process items), supporting activities (maintenance, repair, and operating
supplies), and customer service (finished good and spare parts)
What is inventory management? - Answer--An asset on the balance sheet (return on
assets)
-Efficient (Direct Cost) and effective (Direct Service Levels) management of inventories
is a key factor of success
What are the two most common types of inventory? - Answer-Cycle stock (components
or products that are received in bulk by a downstream partner, *gradually used up* and
then *replenished* again in bulk by the upstream partner)
Safety stock (*extra inventory* that a company holds to protect itself against
uncertainties in either demand or replenishment time)
The role or inventory: production -> _________________ - Answer-cycle stocks
The role of inventory: uncertainty & risk -> ___________________ - Answer-Safety
stocks
The role of inventory: time -> __________________ - Answer-In-transit & WIP stocks
The role of inventory: seasonality/speculative -> ______________________________ -
Answer-Seasonal, hedge, and anticipatory stocks
1) Role of inventory: Demand of supply uncertainties - Answer--Safety stock and hedge
inventory are used to guard against interruptions in supply or spikes in demand or price
-Reduce by improving forecasting methods, attack poor supplier quality
2) Role of inventory: Downstream demand and Upstream capacity mismatches -
Answer--smoothing inventory is used to allow more efficient use of capacity in meeting
volatile demand
-reduce by varying capacity to better meet demand or influence demand to better match
capacity or both
3) Role of inventory: Downstream demand and efficient production/shipment volume
mismatches - Answer--Cycle stocks may be inflated to enhance production or
transportation efficiencies
-Improve by altering business to reduce production lot size or shipment volumes (e.g.,
JIT)
, 4) Role of inventory: Demand and Supply Chain Lead-Time Mismatches - Answer--
anticipation inventories are created and placed at strategic points in the chain to allow
for quick delivery to customers
-improve by focusing on reducing production delivery lead time and persuade
customers to wait longer (e.g., they may wait longer for a customized product)
Major inventory costs - Answer-Inventory carrying costs (ICC), order and setup cost,
expected stockout costs, safety stock costs, in-transit costs
Hidden Rocks of of inventory - Answer-Strategy; need priorities of synchronization of
supply chain
lower inventory levels has you more susceptible to the hidden rocks of inventory...
holding more inventory has you less susceptible to the hidden rocks of inventory but it
comes at the cost of the extra capital and costs tied up in inventory
What is EOQ? - Answer-Economic order quantity
The order quantity that minimizes annual holding and ordering cost for an item
EOQ Assumptions - Answer-Known and constant demand
Known and constant lead time
Instantaneous receipt of material
Costs: only order (setup) cost and holding cost
No stockouts
PROS of inventories - Answer-Busy time with safety stock on hand, if little inventory on
hand then higher throughput of intake and outtake fast.
Cons of Inventory - Answer-1. direct cost (interest if funded by debt)
2. Opportunity cost
3. carrying costs
4. Perishables time-frame if ordering too much
5. less flexibility, lower surface levels with too little
Continuous review system - Answer-An inventory system used to manage *independent
demand* inventory. The inventory level for an item is constantly monitored, and when
the reorder point is reached, an order is released.
Periodic review system - Answer-An inventory system that is used to manage
independent demand inventory where the inventory level for an item is checked at
regular intervals and restocked to some predetermined level.
Single-period inventory system - Answer-A system used when demand occurs in only a
single point in time.
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