Decoupling operations is an important use of inventories.
2. The objective of inventory management is to minimize the cost of holding inventory. True False
The objective of inventory management is to allow satisfactory customer service while keeping costs down. 3
3. A retail store that carries twice the inventory as its competitor will provide twice the customer service level. True False
There is a limit to how high service level can go; if the competitor's service level is 90%, the retailer can't double that. 4
4. The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable. True False
This is the overall objective of inventory management.
5. The two main concerns of inventory control relate to the costs and the level of customer service. True False
These are the essential facets of inventory control.
6. To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: the timing and size of orders. True False
These are the fundamental decisions regarding inventory control. 7
7. In the EOQ formula, holding costs under 10% are expressed as percentages, above 10% are expressed as annual unit costs. True False
Holding costs are expressed in monetary terms, whether as a set value or as a percentage of the per-unit cost. 8
8. DVD recorders would be an example of independent demand items. True False
Components of the DVD recorders would be dependent demand items. 9
9. Reorder point models are primarily used for dependent demand items. True False
Reorder point models are primarily used for independent demand items. 10
10. An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier. True False
These are ordering costs.
11. Decoupling operations applies to the railroad industry. True False
Decoupling refers to buffering operations in manufacturing.
12. Interest, insurance, and opportunity costs are all associated with holding costs. True False
These are holding costs.
13. The A-B-C approach involves classifying inventory items by unit cost, with expensive items classified as ‘A' items and low cost items classified as ‘C' items. True False
A-B-C approach classifies inventory according to some measure of importance. 14
14. An inventory buffer adds value and lowers cost in all supply chains. True False
Many buffers increase costs across supply chains.
15. 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. True False
C items typically represent about 60 percent of the number of items and about 15 percent of the dollar usage. 16
16. EOQ inventory models are basically concerned with the timing of orders. True False
EOQ models are concerned with the size of orders.
17. The average inventory level is inversely related to order size. True False
The average inventory level is positively related to order size. 18
18. The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases. True False
These are inversely related.
19. The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable. True False
The total cost function is relatively flat, so rounding costs little. 20
20. Carrying cost is a function of order size; the larger the order, the higher the inventory carrying cost. True False
Larger order quantities lead to...