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STUDY OUTLINE FOR CHAPTER 7
MANAGING INVENTORIES
1. Briefly explain the role that inventory management played in PolyOne Corp’s financial
turnaround:
2. Define:
Inventory
Raw Materials and Component Parts
Work in Process Inventory
Finished Goods Inventory
MRO Inventory
Transit Inventory
Buffer (Safety) Stock
3. Discuss the four roles of inventory:
1)
2)
3)
2
4)
4. Briefly discuss the financial impact of inventory:
5. Define:
Product Cost
Carrying Cost or Holding Cost
6. Identify the various expenses encompassed in carrying costs:
1)
2)
3)
4)
5)
6)
7. Differentiate between order and setup costs:
8. Define Stockout (Shortage) Cost:
9. Discuss various measures of inventory performance:
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10. Define the following:
Inventory Turnover
Days of Supply
Service Level
11. Discuss the advantages that companies that achieve high inventory turnover rates enjoy:
1)
2)
3)
4)
12. Identify the three dangers of having an inventory turn rate that is too high:
1)
2)
3)
13. Give the formula for calculating the days of supply:
14. Discuss ways to measure service levels:
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15. Discuss the impact of various stockouts (include raw materials, component parts, finished
goods, and MRO items):
16. Define the following:
Independent demand inventory systems
Dependent demand inventory systems
Continuous review model
Periodic review model
17. Discuss the two basic questions that must be answered in planning inventories:
1)
2)
18. Why is the assumption of no inventory variability naïve and unrealistic? Discuss why these
assumptions are necessary to understand the basics of inventory management:
19. Define the following:
Total acquisition cost (TAC)
Saw-tooth diagram
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Economic order quantity (EOQ)
Reorder point
20. Identify the assumptions underlying the EOQ formulation:
1)
2)
3)
4)
5)
21. Discuss why these five assumptions of the EOQ formulation often do not hold true in
practice:
22. Identify the five steps that must be taken to determine the order quantity when quantity
discounts are available:
1)
2)
3)
4)
5)
23. Discuss how lot size restrictions mimic quantity discounts:
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24. Define production order quantity:
25. Briefly discuss how a replenishment order that is delivered in multiple shipments that occur
as the product is produced changes the EOQ:
26. Discuss how variability and uncertainty impact inventory planning:
27. Define demand during lead time:
28. Discuss how to determine the standard deviation of demand during lead time:
29. Define a service level policy:
30. Discuss why determining a service level policy is usually a matter of managerial judgment
and not a quantitative analysis:
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31. Define the following:
Cycle stock
Order interval
Uncertainty period
32. Briefly discuss the differences between a periodic review and a continuous review model:
33. Discuss situations when a manager would use a single period inventory model:
34. Define the following:
Single Period Inventory Model
Target Service Level (TSL)
35. Discuss the impact of location on inventory
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36. Define the following:
Total system inventory
Square root rule
37. Discuss the managerial approaches to reducing inventory costs:
38. Compare the process of managing cycle stocks to that of managing safety stocks:
39. Define the following:
ABC analysis
Pareto’s law
Safety stock levels
40. Discuss the general procedure for a quantitative ABC analysis:
1)
2)
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3)
4)
41. Explain the managerial implications of the location impact on inventory levels:
42. Discuss the importance of inventory information systems and accuracy:
43. Define the following:
Global Trade Item Number (GTIN)
Part Number
Cycle Counting
44. Explain how a two-bin system utilizes the basic concepts of continuous review inventory
models without the need for high-level technology:
45. Discuss procedures for managing inventory across the supply chain:
46. Define and explain the bullwhip effect:
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47. Identify the causes of the bullwhip effect:
48. Discuss the importance of integrated supply chain inventory management:
49. Define the following:
Vendor-managed inventory (VMI)
Collaborative Planning, Forecasting, and Replenishment (CPFR)