OSCM 373 exam 3 UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS
inventory management establish a system for tracking items in inventory and makes decisions about what
to order and how much
A-B-C approach classification system Classifying inventory according to some measure of importance, and allocating
control efforts accordingly
A items (ABC) very important, 10-20% of the number of items in the inventory, and about 60-70%
of the annual dollar value
B items (ABC) moderatley important
C items (ABC) 50-60% of the number of items in inventory but only 10-15% of the annual dollar
value
How to do ABC classification 1. For each item, multiply annual volume by unit price to get annual dollar value
2. arrange annual values in descending order
in an A-B-C system, C items typically represent about this 50%
percentage of items:
Periodic System physical count of items in inventory made at periodic intervals. many items
ordered at the same time; savings in processing and shipping of orders
perpetual inventory system System that keeps track of removals from inventory continuously, thus monitoring
current levels of each item. continuous control; can optimize Q and place orders
when inventory drops to a predetermined minimum level
periodic system cons lack of control between reviews; having to keep extra stock to protect against
shortages
perpetual inventory system cons added cost of record keeping; usually has to be accompanied by a periodic
physical count
when is the best time to embed the RFID tag in the assembly
good?
Economic Order Quantity models identify the optimal order quantity by minimizing the sum of annual costs that vary
with order size and frequency
re-order point when the quantity on hand of an item drops to this amount (quantity-trigger), the
item is reordered
, what does Economic Order Quantity (EOQ) solve how much to order
holding (carrying) costs cost to carry an item in inventory for a length of time, usually a year
ordering costs (setup costs) the costs involved in placing an order or preparing equipment for a job
what is not a component of holding costs? delivery
what should you do to prevent running out of gas increase ROP (amount left)
(inventory)?
Using the EOQ model, if an item's holding cost increases, decrease
its order quantity will:
Single-period model model for ordering of perishables and other items with limited useful lives
the goal of the single-period model is to identify an order quantity that will maximize profit by minimizing the long-run
excess and shortage costs
Service Level probability that demand will not exceed the stocking level (S)
high inventory (costly) leads to a higher service-level and a low probabiliy to stock-out
low inventory leads to a lower service-level and a high probability to stock-out
quality the ability of a product or service to consistently meet or exceed customer
expectations
Dimensions of Service Quality convenience, reliability, responsiveness, time, assurance, courtesy, tangibles,
consistency
dimensions of product (good) quality performance, aesthetics, special features, conformance, reliability, durability,
perceived quality, serviceability
internal failure costs Costs incurred to fix problems that are detected before the product/service is
delivered to the customer.
external failure costs All costs incurred to fix problems that are detected after the product/service is
delivered to the customer
tasting fires is an example of appraisal costs
courtesy gift cards are an example of: external failure cost
inventory management establish a system for tracking items in inventory and makes decisions about what
to order and how much
A-B-C approach classification system Classifying inventory according to some measure of importance, and allocating
control efforts accordingly
A items (ABC) very important, 10-20% of the number of items in the inventory, and about 60-70%
of the annual dollar value
B items (ABC) moderatley important
C items (ABC) 50-60% of the number of items in inventory but only 10-15% of the annual dollar
value
How to do ABC classification 1. For each item, multiply annual volume by unit price to get annual dollar value
2. arrange annual values in descending order
in an A-B-C system, C items typically represent about this 50%
percentage of items:
Periodic System physical count of items in inventory made at periodic intervals. many items
ordered at the same time; savings in processing and shipping of orders
perpetual inventory system System that keeps track of removals from inventory continuously, thus monitoring
current levels of each item. continuous control; can optimize Q and place orders
when inventory drops to a predetermined minimum level
periodic system cons lack of control between reviews; having to keep extra stock to protect against
shortages
perpetual inventory system cons added cost of record keeping; usually has to be accompanied by a periodic
physical count
when is the best time to embed the RFID tag in the assembly
good?
Economic Order Quantity models identify the optimal order quantity by minimizing the sum of annual costs that vary
with order size and frequency
re-order point when the quantity on hand of an item drops to this amount (quantity-trigger), the
item is reordered
, what does Economic Order Quantity (EOQ) solve how much to order
holding (carrying) costs cost to carry an item in inventory for a length of time, usually a year
ordering costs (setup costs) the costs involved in placing an order or preparing equipment for a job
what is not a component of holding costs? delivery
what should you do to prevent running out of gas increase ROP (amount left)
(inventory)?
Using the EOQ model, if an item's holding cost increases, decrease
its order quantity will:
Single-period model model for ordering of perishables and other items with limited useful lives
the goal of the single-period model is to identify an order quantity that will maximize profit by minimizing the long-run
excess and shortage costs
Service Level probability that demand will not exceed the stocking level (S)
high inventory (costly) leads to a higher service-level and a low probabiliy to stock-out
low inventory leads to a lower service-level and a high probability to stock-out
quality the ability of a product or service to consistently meet or exceed customer
expectations
Dimensions of Service Quality convenience, reliability, responsiveness, time, assurance, courtesy, tangibles,
consistency
dimensions of product (good) quality performance, aesthetics, special features, conformance, reliability, durability,
perceived quality, serviceability
internal failure costs Costs incurred to fix problems that are detected before the product/service is
delivered to the customer.
external failure costs All costs incurred to fix problems that are detected after the product/service is
delivered to the customer
tasting fires is an example of appraisal costs
courtesy gift cards are an example of: external failure cost
