SCM 11 – Flashcards

1. "Any idle resource held for future use—those stocks or items used to support production (raw materials), supporting activities (drill bits) and customer service (finished goods, spare parts)" is the definition of A. Sales and operations planning. B. Master production schedule C. Just in time (JIT). D. Inventory.

2. The type of demand which comes from outside the organization, is unpredictable, and usually forecasted is A. Periodic B. Continuous C. Dependent D. Independent

3. The type of demand which is tied to the production of another item (table legs are an example) is A. Periodic B. Dependent C. Continuous D. Independent

4. A company which produces electricity, like Progress Energy, is considering buying extra coal to hold in inventory. They want to buffer against a potential strike at a major coal producer which would likely result in a significant price increase. This type of inventory is A. Safety stock B. Cycle stock C. Anticipation D. Hedging

5. Scholastic, the book publisher, has their suppliers, book printers, manufacture millions of Harry Potter books ahead of time so customers can have instant availability on the launch date. This type of inventory is A. Hedge B. Cycle stock C. Anticipation D. Safety

6. A company which sources raw materials and components from overseas will hold extra inventory of these items due to a mismatch between the timing of customer demand and supply chain lead times. This type of inventory is A. Hedging B. Transportation C. Cycle stock D. Smoothing

7. A computer manufacturer receives 20,000 computer mice in bulk from an upstream supplier, gradually uses them up over time, and then receives another bulk shipment of 20,000 computer mice. This type of inventory is A. Transportation B. Smoothing C. Hedging D. Cycle stock

1. The owner of a vending machine company has weekly stops to check the soda machine at NC State. She checks the inventory levels and fills the machine back up to its full restocking level. She is using which of the following types of independent demand inventory systems? A. Continuous review system B. Periodic review system C. Single period system D. Reorder point system

2. Mr. Drucker uses a periodic review system to manage the inventory in his dry goods store. He likes to maintain 15 sacks of sugar on his shelves based on the annual demand figure of 225 sacks. It costs $2 to place an order for sugar and costs $1 to hold a sack in inventory for a year. Mr. Drucker checks inventory one day and notes that he is down to 9 sacks; how much should he order? A. 6 sacks B. 30 sacks C. 9 sacks D. 15 sacks

3. The R&H Mercantile tracks the use of boxes of macaroni and cheese (using a periodic inventory system) and has concluded that demand during lead time is normally distributed with a mean of 60 boxes and a standard deviation of 24 boxes. R&H Mercantile has been using 91 as a reorder point. What is the likelihood that they will run out of inventory before the next shipment arrives? A. About 10% B. About 5% C. About 20% D. About 0%

1. A company makes tools, such as hammer and tape measures. One of their primary raw materials is steel and if they run out of steel they cannot make tools. The inventory level for steel is constantly monitored and when the reorder point is reached, an order is released for the economic order quantity. The tool company uses which of the following independent demand inventory systems for steel? A. Work-in-process (WP) system B. Periodic review system C. Single period system D. Continuous review system

1. "An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain" is the definition of A. The hedging effect B. The inventory pooling effect C. The cycle stock effect D. The bullwhip effect

2. ________ is holding a safety stock in a single location instead of multiple locations. Several locations then share these inventories to lower overall holding costs. A. Inventory cycling B. Just in time inventory C. Inventory pooling D. Inventory separation

3. Managers must decide where in the supply chain to hold inventory. In general, the decision about where to position inventory is based on two general truths (check two answers) A. The flexibility of inventory decreases as materials move down the supply chain. B. The cost and value of inventory increase as materials move down the supply chain. C. The flexibility of inventory decreases as materials move up the supply chain. D. The cost and value of inventory increases as materials move up the supply chain.

4. The bullwhip effect says that A. The greater the effect of a disturbance upstream, the farther downstream the supply chain B. The farther downstream the supply chain, the greater the impact of a small disturbance upstream. C. The greater the effect of a disturbance downstream, the farther upstream the supply chain. D. The farther upstream the supply chain, the greater the impact of a small disturbance downstream.

5. The cost and value of inventory increase as materials move down the supply chain. One way operations and supply chain managers counteract the negative aspect of this fact is by A. Using a continuous inventory system. B. Using a periodic inventory system. C. Advertising to increase demand. D. Inventory pooling.

1. Companies hold hedge inventory due to: A. Mismatch between timing of customer demand and supply chain lead times. B. Mismatch between downstream partner's demand and most efficient production or shipment volumes for upstream partner. C. Mismatch between downstream demand levels and upstream production capacity. D. Uncertainty in supply or demand.

2. "A system used when demand occurs in only a single point in time" is the definition of A. Mixed inventory systems. B. Periodic inventory systems. C. Single-period inventory systems. D. Continuous inventory systems.

1. Which of these is NOT an assumption of the basic continuous review model? A. The order quantity is constant, regardless of the demand. B. The price of each item is constant, regardless of how many are ordered at a time. C. The lead time to receive a new shipment is constant. D. Demand for the item is constant.

2. You order a box of pencils from an office supply store and use them one-by-one until they are all gone. The pencils in your possession are A. Safety stock B. Hedge inventory C. Anticipation inventory D. Cycle stock

3. The goal of a ________ is to establish a stocking level that strikes the best balance between expected shortage costs and expected excess costs. A. Continuous inventory system B. Mixed inventory system C. Single-period inventory system D. Periodic inventory system

1. A computer manufacturer maintains an extra 1,000 computer mice in inventory to protect themselves against uncertainties in either demand or replenishment time. This type of inventory is A. Hedging B. Transportation C. Cycle stock D. Safety stock

2. A men's suit is composed of primary material, lining, thread, buttons, and a zipper. Which of these statements is best? A. Suit buttons are independent demand items. B. Thread is an independent demand item. C. Suits are dependent demand items. D. Suit zippers are dependent demand items.

The distortion of customer demand information moving upstream in the supply chain is known as A. The inventory pooling effect B. The cycle stock effect C. The hedging effect D. The bullwhip effect

4. The owner of a PMEX gas station checks the inventory level of gasoline constantly throughout the day so that he can reorder product when his inventory level falls to 200 gallons. The PMEX station uses what type of inventory systems? A. Continuous review system B. Dependent demand system C. Periodic review system D. Order-up-to system

5. Which of the following is not a characteristic of the Periodic Review Model for inventory management? A. The time interval between inventory reviews is fixed B. Order quantity may vary on different orders C. Will have less safety stock inventory than a continuous review model D. Has a longer uncertainty period than the continuous review model

6. Guadalupe sells imported watches from Germany on his e-commerce website. He wants to determine the restocking level for his bestselling watch. Which of the factors below is NOT relevant to this decision? A. The average demand per period B. The variability of demand C. The annual inventory holding cost per watch D. Replenishment lead time

7. Which of the following is not a component of inventory holding cost? A. Sales expenses on inventory B. Taxes in inventory C. Storage costs D. Capital tied up in inventory

8. Which of the following is a characteristic of the Continuous Review Model for inventory management? A. The time interval between inventory reviews is fixed. B. Order quantity may vary on different orders. C. Will have less safety stock inventory than a periodic review model. D. Has a longer uncertainty period than the continuous review model.

9. Companies hold safety stock inventory due to A. Mismatch between downstream demand levels and upstream production capacity. B. Uncertainty in supply or demand. C. Mismatch between downstream partner's demand and most efficient production or shipment volumes for upstream partner. D. Mismatch between timing of customer demand and supply chain lead times.

10. ________ is holding a safety stock in a single location instead of multiple locations. Several locations then share these inventories to lower overall holding costs. A. Inventory separation B. Inventory cycling C. Inventory pooling D. Just in time inventory