Busi 411 Exam 4

Inventory control asks 2 questions:

How much and when to order?

Inventory questions answered by

EOQ (Economic Order Quantity)

EOQ =

Sqrt((2DS)/H)

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

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

False

In the basic EOQ model, if D 60 per month, S = $12, and H = $10 per unit per month, EOQ is:

= 12

Qp stands for

Economic production quantity

Qp =

Sqrt((2DS)/H) x Sqrt(p/(p-u))

Calculate Production Order Quantity or EPQ if D = 1,000 units, S = $10, H = .50 per unit, p = 8 units per day, u = 4 units per day =

282

The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable.

True

Demand is 100 units per day. Lead time is 15 days. Safety Stock is 150 units. What is the R.O.P.?

1650

ROP stands for

Reorder Point

ROP =

D x LT + Safety Stock

One important role of purchasing? (Be knowledgeable about new products from suppliers, maintain numerous sources from suppliers, set quality standards, obtain lowest prices)

E. All of the Above

A _____ inventory system continuously updates the inventory system (FOI, periodic, or perpetual)?

Perpetual

FOI (Fixed-Order-Interval) inventory system

New inventory is ordered in regular batches to maintain standard levels.

A company's supply chain involves materials and information from suppliers.

True

A fundamental principle or tenant in lean systems is that workers are (liabilities, assets, only best when granted limited authority)?

Assets

Anne Chovies owns a pizza parlor. She uses 20 lbs. of pepperoni every day, order costs are $10, holding costs are $0.04 per lbs. per day, LT is 3 days, cost $3/lbs.. If she were to order 90 lbs. (EOQ) of pepperoni at a time, what would be the average inventory level?

EOQ/2 = 45

If given Annual Demand and EOQ (Qo). How many orders are placed per year?

D/Q

Poka-yoke means

"Mistake-proofing"

Cross dock is when an inbound pallet is unloaded from a trailer and immediately then reloaded without being unpacked and stocked

True

The 5S methodology

focuses on workplace organization and efficiency:

5S stands for

sort, straighten, shine, standardize, sustain

6S

adds safety

Product Design in a Lean Environment emphasizes

simplicity, standardization, and manufacturability.

Inventory Costs in Lean Production

ordering costs, holding costs, and stockout costs

Just-in-Time (JIT)

Lean production minimizes inventory costs by aligning production closely with demand.

Measuring Reliability in the Supply Chain

perfect order fulfillment rate, on-time delivery, and supply chain response time.

Lean Product Design and Production optimize

efficiency and reduce waste.

Modular Design

enables flexibility and scalability in production.

Value Engineering

identifies opportunities to remove non-value-adding features.

ABC inventory classification

prioritizes items based on their value and usage frequency.

A items

typically represent about 10-20% of items but 60-70% of value.

B items

account for about 30% of items and 15-20% of value.

C items

make up about 50-60% of items but only 10-15% of value.