Inventory Management

The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.

• TRUE

• FALSE

The purchase-order lead time is the ____.

• time between placing an order and its delivery

• time between receiving a customer order and producing the products

• time between receiving a customer order and delivering the items

• time required to correct errors in the defective products

Inventory management promotes minimizing inventory holding costs while maintaining ____, ____, and _____ high.

• customer orders, product value, quality

• production output, quality, customer service

• integrity, services, employee morale

• production WIP, customer satisfaction, standard

The optimal ordering quantity in the EOQ model occurs at the point where the sum of carrying costs and ordering costs are minimized.

• TRUE

• FALSE

The ideal order quantity a company should purchase for its inventory given a cost set of production, demand rate, and other variables is known as:

• Reorder point

• Economic Order Quantity

Under economic-order quantity decision model, it is assumed that _____.

• the quantity ordered can vary at each reorder point

• demand, operating costs, and carrying costs are uncertain

• the purchasing cost per unit is affected by the order quantity

• no inventory stockouts occur

Safety stock:

• Goods kept in store to cover seasonal demand e.g., Summer Sale

• Goods kept in store to cover unforeseen shortages or fluctuation in demand

The maximum order level should not exceed the safety stock.

• TRUE

• FALSE

Stockouts is synonymous with surplus.

• TRUE

• FALSE

More order size or quantities entails more ordering costs.

• TRUE

• FALSE