Supply Chain Chapter 12

The rate of demand is an important factor in determining the ROP.

True

Annual ordering cost is inversely related to order size.

True

One important use of inventories in manufacturing is to decouple operations through the use of work-in-process inventories.

True

Interest, insurance, and opportunity costs are all associated with holding costs.

True

The objective of inventory management is to minimize the cost of holding inventory.

False

A retail store that carries twice as much inventory as its competitor will provide twice the customer service level.

False

The A-B-C approach involves classifying inventory items based on their name.

False

In the A-B-C approach, C items typically represent about 15 percent of the number of items, but 60 percent of the dollar usage.

False

The two basic issues in inventory are how much to order and when to order.

True

Carrying cost is a function of order size; the larger the order quantity, the higher the inventory carrying cost.

True

EOQ inventory models are basically concerned with the timing of orders.

False

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

True

In the A-B-C classification system, items which account for about 15 percent of the annual dollar value, but which account for a majority of the inventory items, would be classified as

C Items

Which of the following interactions with vendors would potentially lead to inventory reductions?

Reduce Lead Times

A risk avoider would want __________blank safety stock.

More

If no variations in demand or lead time exist, the ROP will equal

Expected usage during lead time

In the A-B-C classification system, items which account for about 60 percent of the annual dollar value, but only about 10 to 15 percent of the items in inventory, would be classified as

A Items

Which is not a true assumption in the basic EOQ model?

No more than three items are involved.

Which one of the following is not generally a determinant of the reorder point?

Purchase Cost

Which of the following is not one of the assumptions of the basic EOQ model?

Quantity discounts are available.

Which of the following is typically the largest of all inventory costs?

Purchase Cost

Dairy items, fresh fruit, and newspapers are items that

are subject to deterioration and spoilage.

In an A-B-C system, the typical percentage of the number of items in inventory that is classified as A items is about

10

In the basic EOQ model, an annual demand of 40 units, an ordering cost of $5, and a holding cost of $1 per unit per year will result in an EOQ of

20