Test Inventory Management

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Inventory Management

2. With the advent of low-cost computing, do you see alternatives to the popular ABC classifications?

The alternatives would be that by minimizing the sums of the set-up cost and carrying-cost, you would also minimize the overall costs.

5. Explain the major assumptions of the basic EOQ model.

1. Demand for an item is known, reasonably constant, and independent of decisions for other items. 2. Lead time, the time between placement and receipt of the order, is known and consistent. 3. Receipt of inventory is instantaneous and complete, the inventory order arrives in one batch at one time. 4. Quantity discounts are nor possible.

5. The only variable costs are the set-up and holding costs. 6. Stockouts can be completely avoided if orders are placed at the right times.

6. What is the relationship of the economic order quantity to demand? To the holding cost? To the set-up costs?

The relationship is that with both EOQ and demand, that the demand for the items are known, and independent of decisions. The holding costs and set-up costs are reduced substantially over time by planning for them correctly.

8. What are the advantages of cycle counting?

Inventory items are counted, records are verified, and inaccuracies are periodically documented . You can then trace the inaccuracies and the appropriate remedial action is taken to ensure the integrity of the inventory system.

9. What impact does a decrease in setup time have on EOQ?

It is an excellent way to reduce inventory investment and to improve the productivity.

11. What is meant by service level?

It is the concern of management in maintaining an adequate service level in the face of uncertain demand.

17. How are inventory levels monitored in retail stores?

Inventory is monitored at retail stores using the Perpetual inventory system. This keeps track of each withdrawal or addition to inventory continuously, so that the records are always correct.

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