Podcast
Questions and Answers
What is the purpose of ABC Analysis in inventory management?
What is the purpose of ABC Analysis in inventory management?
- To analyze inventory levels based on alphabetical order
- To prioritize low unit cost items over high unit cost items
- To manage delivery and quality problems effectively
- To establish policies focusing on critical parts over trivial ones (correct)
Which of the following is NOT a criterion that may be used in ABC Analysis other than annual dollar volume?
Which of the following is NOT a criterion that may be used in ABC Analysis other than annual dollar volume?
- Supplier credit terms (correct)
- Quality problems
- Anticipated engineering changes
- Delivery problems
Why are accurate records essential in production and inventory systems?
Why are accurate records essential in production and inventory systems?
- To make precise decisions about ordering and shipping (correct)
- To determine the number of items in each class
- To focus on critical parts in inventory
- To plan for anticipated engineering changes
What is the purpose of cycle counting in inventory management?
What is the purpose of cycle counting in inventory management?
Why is it important to count A items every month in the example provided?
Why is it important to count A items every month in the example provided?
In the context of cycle counting policies, why are stockrooms required to be secure?
In the context of cycle counting policies, why are stockrooms required to be secure?
What are holding costs in inventory management?
What are holding costs in inventory management?
In inventory management, what does the EOQ model assume about demand?
In inventory management, what does the EOQ model assume about demand?
What are setup costs in the context of inventory management?
What are setup costs in the context of inventory management?
Which of the following is NOT an assumption of the Basic EOQ Model?
Which of the following is NOT an assumption of the Basic EOQ Model?
What influences Holding Costs in inventory management?
What influences Holding Costs in inventory management?
How do Dependent Demand and Independent Demand differ in inventory management?
How do Dependent Demand and Independent Demand differ in inventory management?
What is the purpose of lead time offset in MRP systems?
What is the purpose of lead time offset in MRP systems?
In MRP systems, what does the term 'explosion' refer to?
In MRP systems, what does the term 'explosion' refer to?
Why do subassemblies in MRP systems exist only temporarily?
Why do subassemblies in MRP systems exist only temporarily?
What is the significance of low-level coding in MRP systems?
What is the significance of low-level coding in MRP systems?
How are gross requirements determined in MRP systems?
How are gross requirements determined in MRP systems?
What does 99% accuracy in outstanding purchase orders mean for MRP systems?
What does 99% accuracy in outstanding purchase orders mean for MRP systems?
What is the order amount of jackets needed if the target value is 50, there is no on-hand inventory, no earlier orders not yet received, and 3 jackets are back ordered?
What is the order amount of jackets needed if the target value is 50, there is no on-hand inventory, no earlier orders not yet received, and 3 jackets are back ordered?
In the context provided, what is the annual holding cost rate for the ergonomically correct office chair at Paper Clips, Etc.?
In the context provided, what is the annual holding cost rate for the ergonomically correct office chair at Paper Clips, Etc.?
For Hucbaby Motor Services, Inc., if the average weekly demand for copper wire is 20 spools with a standard deviation of 6 spools, what is the reorder point if the desired service level is set at 90%?
For Hucbaby Motor Services, Inc., if the average weekly demand for copper wire is 20 spools with a standard deviation of 6 spools, what is the reorder point if the desired service level is set at 90%?
What is the acquisition lead time for Paper Clips, Etc. if their order lead time for the office chair is 4 days?
What is the acquisition lead time for Paper Clips, Etc. if their order lead time for the office chair is 4 days?
For Hucbaby Motor Services, Inc., what is the safety stock needed for copper wire when the desired service level is at 90% and z=1.28?
For Hucbaby Motor Services, Inc., what is the safety stock needed for copper wire when the desired service level is at 90% and z=1.28?
Based on the given information, how many days per year is PCE's store open?
Based on the given information, how many days per year is PCE's store open?
What is one of the disadvantages of ERP systems mentioned in the text?
What is one of the disadvantages of ERP systems mentioned in the text?
Which aspect does aggregate planning aim to minimize over the planning period?
Which aspect does aggregate planning aim to minimize over the planning period?
What is a strategy recommended for aggregate planning to meet future high demand?
What is a strategy recommended for aggregate planning to meet future high demand?
Why can shortages in inventory during high demand periods be problematic?
Why can shortages in inventory during high demand periods be problematic?
What is a key issue related to ERP implementation according to the text?
What is a key issue related to ERP implementation according to the text?
Which type of workforce variation is suggested as a way to accommodate changes in demand?
Which type of workforce variation is suggested as a way to accommodate changes in demand?
Study Notes
Inventory Management
- Finished goods are completed products awaiting shipment, classified into three categories based on annual dollar volume: Class A (high), Class B (medium), and Class C (low)
- ABC Analysis is used to establish policies focusing on critical parts, with other criteria available beyond annual dollar volume
- Examples of ABC Analysis policies:
- More emphasis on supplier development for A items
- Tighter physical inventory control for A items
- More care in forecasting A items
- Record accuracy is crucial, enabling organizations to make precise decisions about ordering, scheduling, and shipping
- Cycle counting involves counting and updating records periodically, often used with ABC analysis
- Example: 5000 items in inventory, with A items counted every month, B items every quarter, and C items every 6 months
Independent and Dependent Demand
- Independent demand: demand for an item is independent of other items in inventory
- Dependent demand: demand for an item is dependent on demand for another item in inventory
- Holding, ordering, and setup costs:
- Holding costs: costs of holding or carrying inventory over time
- Ordering costs: costs of placing an order and receiving goods
- Setup costs: costs of preparing machines or processes for manufacturing an order
Inventory Models for Independent Demand
- Basic Economic Order Quantity (EOQ) model:
- Demand is known, constant, and independent
- Lead time is known and constant
- Receipt of inventory is instantaneous and complete
- Quantity discounts are not possible
- Only variable costs are setup and holding
- Q = number of pieces per order, Q* = optimal number of pieces per order (EOQ)
MRP Structure and Lead-Times
- MRP systems require 99% accuracy
- Lead times: the time required to purchase, produce, or assemble an item
- Determining gross requirements: starts with a production schedule for the end item, using lead time to determine when to release orders
Aggregate Planning and ERP Systems
- Aggregate planning: determines quantity and timing of production for the immediate future, aiming to minimize cost by adjusting production, labor, inventory, overtime, and subcontracting
- ERP Systems:
- Advantages: increases communication, provides off-the-shelf software, and may provide a strategic advantage
- Disadvantages: expensive, complex, and involves major changes in the company
- Aggregate planning strategies:
- Capacity options: changing inventory levels, increasing or decreasing workforce size, using part-timers or overtime, and subcontracting
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Description
Learn about ABC analysis, a technique used in inventory management to categorize items based on their importance. Understand how it helps in establishing policies that focus on critical parts and prioritize resources efficiently.
