chapter 9: Operations Management: Processes and Supply Chains, 10e

Operations Management: Processes and Supply Chains, 10e
(Krajewski et al.)
Chapter 9 Supply Chain Inventory Management
1) Inventory management is the planning and controlling of inventories in order to meet the
competitive priorities of the organization.
Answer: TRUE
Reference: Introduction
Difficulty: Easy
Keywords: inventory management, planning, controlling
2) When looking at inventory management, the term "lot size" refers to the physical dimensions
of the area where the inventory is stored.
Answer: FALSE
Reference: Introduction
Difficulty: Easy
Keywords: inventory management, lot size
3) When looking at inventory management, the term "lot size" refers to the quantity of an
inventory item management either buys from a supplier or manufactures using internal
processes.
Answer: TRUE
Reference: Introduction
Difficulty: Easy
Keywords: inventory management, lot size, buys, manufactures
4) The primary reason for keeping inventories low is that inventory represents a temporary
monetary investment in goods on which a firm must pay interest.
Answer: TRUE
Reference: Inventory and Supply Chains
Difficulty: Easy
Keywords: inventory, investment
5) One component of the holding cost of inventory is interest.
Answer: TRUE
Reference: Inventory and Supply Chains
Difficulty: Moderate
Keywords: holding cost, inventory, interest
6) One component of the ordering cost of inventory is shrinkage.
Answer: FALSE
Reference: Inventory and Supply Chains
Difficulty: Moderate
Keywords: ordering cost, shrinkage
7) A stock out occurs when an item that is typically stocked is not available to satisfy a demand
the moment it occurs.
Answer: TRUE
Reference: Inventory and Supply Chains
Difficulty: Moderate
Keywords: stockout
8) A backorder occurs when a customer order cannot be filled when it is placed, but is instead
filled later.

, Answer: TRUE
Reference: Inventory and Supply Chains
Difficulty: Moderate
Keywords: backorder, fill
9) Setup cost is independent of order size.
Answer: TRUE
Reference: Inventory and Supply Chains
Difficulty: Moderate
Keywords: setup cost
10) Reducing setup costs will increase the pressure to keep larger inventories.
Answer: FALSE
Reference: Inventory and Supply Chains
Difficulty: Moderate
Keywords: setup cost
11) Increasing inventory levels can sometimes help a firm reduce both its inbound and
outbound transportation costs.
Answer: TRUE
Reference: Inventory and Supply Chains
Difficulty: Moderate
Keywords: pressure for large inventories
12) A quantity discount is attractive because there is a drop in the price per unit when the
order is sufficiently large.
Answer: TRUE
Reference: Inventory and Supply Chains
Difficulty: Moderate
Keywords: quantity discount
13) Repeatability is an undesirable feature of some orders because they must be repeated
until the order is filled correctly.
Answer: FALSE
Reference: Inventory and Supply Chains
Difficulty: Moderate
14) The primary lever to reduce anticipation inventory is to place orders closer to the time when
they must be received.
Answer: FALSE
Reference: Inventory and Supply Chains
Difficulty: Moderate
Keywords: anticipation inventory, safety stock
15) A stock-keeping unit (SKU) is an individual item or product that has an identifying code and
is held in inventory somewhere along the supply chain.
Answer: TRUE
Reference: ABC Analysis
Difficulty: Easy
Keywords: SKU, individual item, inventory, identifying code
16) A stock-keeping unit (SKU) is a specially designed container for holding a specific amount
of an inventory item somewhere along the supply chain.
Answer: FALSE