Operations Management Test 3

Front 1

Cycle stock

Back 1

components or products that are received in bulk by a down stream partner, gradually used up and the replenished again in bulk by the upstream partner.

Front 2

Safety stock

Back 2

Extra inventory that companies hold to protect themselves against uncertainties in either demand or replenishment time.

Front 3

Anticipation inventory

Back 3

Inventory that is held in anticipation of customer demand.

Front 4

Hedge inventory

Back 4

a form of inventory buildup to buffer against some event that may not happen. Hedge inventory planning involves speculation related to potential labor strikes, price increases, unsettled governments, and events that could severely impair the company's strategic initiatives.

Front 5

Transportation Inventory

Back 5

Inventory that is moving from one link in the supply chain to another.

Front 6

Smoothing inventories

Back 6

Inventories used to smooth out differences between upstream production levels and downstream demand.

Front 7

What are four inventory drivers?

Back 7

1) Uncertainty in supply or demand
2) Mismatch b/t downstream partner's demand and most efficient production or shipment volumes for upstream partner.
3) Mismatch b/t downstream demand levels and upstream production capacity.
4) Mismatch b/t timing of customer demand and supply chain lead times.

Front 8

Independent demand items are?

Back 8

Inventory items w/ demand levels that are beyond a company's complete control.

Front 9

Dependent demand items are?

Back 9

Inventory items that are tied directly to the company's planned production of another item.

Front 10

Service level

Back 10

A term used to indicate the % of time inventory levels will be high enough to meet demand during the reorder period.

Front 11

Periodic review system

Back 11

An inventory system used to manage independent demand inventory. The inventory level for an item is checked at regular intervals and restocked to some predetermined level. (Restocking Level)

Front 12

Continuous review system

Back 12

An inventory system used to manage independent demand inventory. The inventory level for an item is constantly monitored, and when the reorder point is reached, an order is released.

Front 13

Economic order quantity

Back 13

the order quantity that min. annual holding and ordering costs for an item.

Front 14

What are some costs that increase as order size goes up?

Back 14

Invested funds, Storage space, Insurance

Front 15

What are some costs that decrease as order size goes down?

Back 15

Ordering, stock-out, Transportation, Potential for quantity discounts

Front 16

Single-period inventory system

Back 16

A system used when demand occurs in only a single point in time.

Front 17

Target Service level

Back 17

For a single-period inventory system, the service level at which the expected cost of a shortage equals the expected cost of having excess units.

Front 18

When do you know the exact reorder point?

Back 18

When both lead time and demand are constant.

Front 19

The higher the Z is:

Back 19

The lower the risk of stocking out;
The higher the average inventory level.

Front 20

How do you develop a single inventory system?

Back 20

1) Determine a target service level that strikes the best balance b/t shortage cost and excess cost.
2) Use the target service level to determine the target Stocking Point (TS) for the item.