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WorksheetsScmt 2103 6-8
Total questions: 79
Worksheet time: 41mins
Which are components of lead time?
Order transmittal
Forecasting sales
Loading onto the truck
Waiting in the store checkout line
Order picking
In a retail store, when does the lead time end?
When the inventory ships from the DC
When the inventory is received in the backroom
When the inventory scans at point of sale
When the inventory is stocked on the shelf
Lead time variability is really a measure of lead time ___________________.
Creation
demand
magnitude
Uncertainty
Which has the correct order of lead time processes?
Order creation, picking, staging, transit
Order creation, staging, transit, picking
Order creation, staging, picking, transit
Order creation, transit, picking, staging
Which is a common bottleneck mentioned in the video that increases lead time?
Receiving facilities at or near capacity
Too many holidays
Slow checkout lines at retail stores
Traffic congestion
Lead time is best defined as:
The time it takes goods to be transported from one link on the supply chain to the next.
The time between when a product is received and when it is available for use.
The time between when an order is placed and when it is received and available for use or sale.
The time between when a good is out of stock and when an order is placed to replenish inventory levels.
Lead time is the time between when an order is placed and the inventory is ___________________.
Shipped
Available to use
Delivered
Received
If a fulfillment center has no on-hand inventory but receives an order that cannot be immediately filled, this order represents ______________ if the customer will wait.
Lead time
Uncertainty
A backorder
On-order inventory
Safety stock increases which aspect of a continuous review policy?
Reorder point
Lead time
Demand
Both A&B
When determining when or how much to order, which inventory variable should be used?
Back Orders
On hand inventory
Inventory position
On order inventory
Which inventory policy will create the most uncertainty for a company's transportation providers?
Periodic review
Hybrid review
Continuous review
Unit review
How can a company's inventory position be determined?
On-hand inventory plus on-order inventory
On-hand inventory minus on-order inventory minus backorders
On-hand inventory plus on-order inventory minus backorders
On-order inventory plus backorders
If a company places a replenishment order on the same day each week, which policy is being used?
Hybrid review
Continuous review
Unit Review
Periodic review
Which inventory policy requires less safety stock?
Periodic review
Unit review
Naive policy
Continuous Review
A reorder point is a point in _______________________.
Time
The number of back orders
A company's on-hand inventory
A company's inventory position
If a customer uses a continuous review policy to manage inventory, when is it possible to stockout?
Never
Only during the lead time
Only during the review interval
Any time
Inventory is good in the right _______________.
Quantity
Temperature
Company
Policy
Inventory is a supply of goods that are held for purpose of _______________.
Lost Sales
Creating goodwill
Capital investment
future utilization
A bottleneck is the ______________ part of a process.
Fastest
Slowest
Most variable
Smoothest
Which form of inventory is the most expensive to hold?
Raw materials
Work in process
Finished goods
Back orders
Which of the following is/are a form of inventory?
Raw materials
Work in process
Finished goods
Backorders
Which is a clear sign of a bottleneck in a manufacturing process?
Which is a clear sign of a bottleneck in a manufacturing process?
Work-in-process inventory is evenly distributed.
Work-in-process inventory is building behind.
There is no work-in-process inventory.
Which type of inventory is the amount of inventory that is expected to sell during a replenishment period?
Cycle Stock
Safety Stock
Anticipatory inventory
In transit inventory
Which type of inventory is in a transportation unit?
Cycle stock
Safety stock
Anticipatory inventory
In-transit inventory
Which form of inventory is being transformed into a final product?
Raw materials
Work in process
Finished goods
Backorders
Which type of inventory is the amount of the expected amount of inventory on-hand when the next replenishment arrives?
Cycle Stock
Safety stock
Anticipatory inventory
In-transit inventory
Which type of inventory allows a company to take advantage of transportation utilization?
Cycle stock
Safety stock
Anticipatory inventory
In-transit inventory
Which type of inventory is used as a buffer against uncertainty in demand and lead time?
Cycle stock
Safety stock
Anticipatory inventory
In-transit inventory
Obsolescence is likely a bigger problem for which type of product.
Canned green beans
Fresh apples
Toilet paper
Cereal
The cost associated with inventory shrink is classified as a ________ cost.
Capital
Storage
Risk
Service
Which aspect of inventory carrying cost is usually the largest?
Capital
Storage
Risk
Service
Capital costs can be viewed as the _________________ associated with the money tied up in inventory.
Opportunity
Reductions
Storage
Interest
Which is a cost associated with inventory?
Item cost
Ordering or setup costs
Shortage Cost
Carrying cost
All of the above
Taking the value of the item, of the inventory, and ________________ the inventory carrying cost percentage tells me how much it costs to carry that inventory annually.
multiplying it by
dividing it by
adding it to
subtracting
For which type of product is a shipper likely to be least concerned about transportation?
Product with low carrying cost
Product with medium carrying cost
Product with high carrying cost
If the inventory carrying cost percentage is 25%, then how much would it cost to carry an inventory with a value of $900?
225
3600
1125
675
What is the special problem posed by the newsvendor model?
Given uncertain, variable demand, the seller is likely to stock too many or too few with only a short time frame to sell the product at full cost.
Given stable, predictable demand, the seller is likely to stock too many or too few with only a short time frame to sell the product at full cost.
Given stable, predictable demand, the seller is likely to stock too many or too few with only a short time frame to sell the product at full cost.
Given stable, predictable demand, the seller is likely to stock too many or too few with an extended time frame to sell the product at full cost.
Which of the following is not part of the cost of overproduction?
Ordering/setup cost.
Revenue received from a disposal process.
Costs incurred from a disposal process.
Production/purchase cost.
Which of the following contributes to profit margin per unit?
Costs to produce/purchase the item.
Costs to move/transport the item.
Under or Overstocking the item.
All of the above.
If the profit margin per unit decreases (all else equal), the optimal order quantity will ___________.
stay the same.
Decrease
Increase
Which of the following is not relevant in determining how much to order when using a newsvendor model?
Cost of ordering
Cost of overstocking
Cost of understocking
Everything else held equal, an increase in transportation cost is likely to _________.
increase the cost of overstocking.
increase the cost of understocking.
decrease the cost of understocking.
both (a) and (b) are correct.
Which of the following represents the cost of understocking?
Costs incurred from a disposal process.
Lost net profit (per unit)
Ordering/setup cost.
Revenue received from a disposal process.
Everything else held equal, a decrease in the cost of overstocking is likely to _________.
decrease the cost of transportation.
increase the cost of transportation
increase the unit profit margin
decrease the unit profit margin
When the transportation costs increase, the profit margin per unit ___________.
Increase
Stay the same
decrease
If a retailer purchases a certain item under the newsvendor model and the cost of overstocking and the cost of understocking are $10 and $45, respectively, what would be the optimal in-stock probability?
47
96
56
82
A merchant is planning how much of a high-margin product to purchase for a special event. Any product not sold can be used by the store later in a different product assortment. Which of the following is TRUE?
Everything else held equal, the merchant would prefer to overstock rather than understock.
Everything else held equal, the merchant would prefer to understock rather than overstock.
The newsvendor model may not be the best inventory decision tool for this application.
Both (a) and (c) are true.
Using the newsvendor model, average demand for items for a yearly sales event is equal to 1000 with a standard deviation of 100. If the optimal in-stock probability is 83%, you would order ___________?
More than 1000 trees.
Exactly 1000 trees.
Less than 1000 trees.
If a retailer purchases a certain item under the newsvendor model and the cost of overstocking and the cost of understocking are $180 and $290, respectively, what would be the optimal in-stock probability?
62
84
79
28
In the newsvendor model, what is a simple way to define the optimal in-stock probability (%)?
Cost of understock / (cost of overstock - cost of understock).
Cost of understock / (cost of overstock + cost of understock).
Cost of overstock / (cost of overstock + cost of understock).
Cost of overstock / (cost of overstock - cost of understock).
A store receives a low-margin consumable with a shelf life of only a few days after which the item discarded. Which of the following is TRUE?
Everything else held equal, the merchant would prefer to overstock rather than understock.
Everything else held equal, the merchant would prefer to understock rather than overstock.
Because the merchant discards unsold items, the overstock costs are zero.
None of the above statements are true.
_________ tends to increase the in-stock probability.
An increase in the cost of stocking out
A decrease in the cost of overstocking
Both (a) and (b)
Neither (a) nor (b)
A retailer estimated demand for next year's blue sweaters at 1,000 and a standard deviation of 100. The optimal in-stock probability is about 83% and the order quantity is 1,100. The retailer learns of an attractive offer from a re-seller should any overstocking occur. Consequently, the order quantity is expected to _________.
Stay the same
Increase
Decrease
Which of the following is correct regarding the optimal order quantity (Q*)?
Q* = Average expected demand + (Number of standard deviations / Standard deviation of demand)
Q = Average expected demand + (Number of standard deviations Standard deviation of demand)
Q = Number of standard deviations - (Average expected demand Standard deviation of demand)
Q = Number of standard deviations + (Average expected demand Standard deviation of demand)
If a retailer purchases a certain item under the newsvendor model and the optimal in-stock probability is 97% - which is 1.881 standard deviations above the mean - what would be the optimal order quantity given that the average expected demand is 813 with a standard deviation of 71? (Round up)
947
923
884
680
Which of the following statements is TRUE?
If the optimal in-stock probability is greater than 50%, then we order less than the average expected demand.
If the optimal in-stock probability is less than 50%, then we order more than the average expected demand
As the optimal in-stock probability increases, the optimal order quantity decreases.
As the optimal in-stock probability increases, the optimal order quantity increases
If a retailer purchases a certain item under the newsvendor model and the optimal in-stock probability is 93% - which is 1.48 standard deviations above the mean - what would be the optimal order quantity given that the average expected demand is 347 with a standard deviation of 41.8? (Round up)
367
416
286
490
Everything else held equal for an optimal in-stock probability of 83%, an increase in the variation of average demand will mean ___________.
an increase in the optimal order quantity.
no change in the optimal order quantity.
a decrease in the optimal order quantity.
Under the newsvendor model, when the manufacturer increases its prices, __________.
the retailer's optimal order quantity is more likely to decrease.
the retailer's cost of understocking decreases
the retailer's risk decreases.
None of the above are true.
In the newsvendor model, if the producer charges ______, the cost of overstocking goes _____ and the cost of understocking ______.
more; down; goes up
less; down; goes up
less; down; is unaffected
more; down; is unaffected
Which of the following statements is TRUE?
If the producer/manufacturer increases its prices to a retailer, the retailer's cost of understocking decreases.
If the producer/manufacturer reduces its prices to a retailer, the retailer's in-stock probability decreases
If the producer/manufacturer reduces its prices to a retailer, the retailer's profit margins increase
A retailer's risk decreases ____________.
when its supplier lowers its prices.
when it locates favorable salvage alternatives.
when its transportation costs decrease.
all of the above.
Under the newsvendor model, when the manufacturer increases its prices, __________.
the retailer's optimal order quantity is more likely to decrease.
the retailer's cost of understocking decreases.
the retailer's risk decreases.
None of the above are true.
Generally in the newsvendor model the optional order quantity will ______ when the producer's price _____.
increase; decreases
increase; increases
decrease; decreases
As the order quantity decreases, what happens to inventory holding cost?
It should stay the same.
It should decrease.
It should increase.
When using the continuous review model, what dictates when an order is placed?
Economic Order Quantity
Reorder point
Review interval
Cycle stock
If lead time increases, what should happen to the reorder point?
It should stay the same.
It should decrease.
It should increase.
Which costs determine the Economic Order Quantity?
Holding cost
Setup cost
Backroom storage cost
Margin
The Economic Order Quantity (EOQ) seeks to...
Minimize the setup cost and holding cost.
Maximize the products in stock.
Always avoid having a product out of stock.
Order the correct amount to avoid stock outs.
If the forecast of demand increases, what will happen to the reorder point?
It should stay the same.
It should decrease.
It should increase.
As a customer increases service level to 99% from 97%, what will likely happen?
The customer will hold more cycle stock.
The customer will increase safety stock.
Demand during lead time must increase.
The customer will decrease safety stock.
As lead time variability increases, what should happen to safety stock?
It should stay the same.
It should decrease.
It should increase
If a truck is late and no stockout actually occurred, which statement is accurate?
There was enough safety stock to cover the longer lead time.
There was enough cycle stock to cover the longer lead time.
The reorder point was adjusted because the truck was late.
These two things are not simultaneously possible.
When demand and lead time are uncertain, the reorder point is made up of which of the following?
Safety stock
Expected demand during the lead time
Economic Order Quantity
Holding cost
Type: MC
Inventory holding cost is derived from which two factors?
Service level and inventory carrying cost%
Inventory carrying cost % and item cost
Item cost and setup cost
Inventory carrying cost % and setup cost
Which is an alternate (instead of analytical) approach to determine demand and lead time parameters?
Empirical
Estimated
Mathematical
Derived
Which two basic questions does an inventory policy answer?
How much should be ordered?
Who should place the order?
When should an order be placed?
How much will the order cost?
For a customer with a 99% service level, in how many replenishment periods out of 100 is the customer willing to have a stockout?
0
1
10
100
Which is a key factor when developing an inventory policy?
Margin %
Warehouse utilization
Labor cost
Forecast of demand or sales
