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Exercise Questions

The document contains exercise questions about inventory management topics such as disproportionate inventory risk, customer service strategies, balancing service level and costs, and the impact of customization on supply chains. It also includes calculation questions about determining reorder points, economic order quantities, and periodic order quantities.

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Jae Mi
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58 views

Exercise Questions

The document contains exercise questions about inventory management topics such as disproportionate inventory risk, customer service strategies, balancing service level and costs, and the impact of customization on supply chains. It also includes calculation questions about determining reorder points, economic order quantities, and periodic order quantities.

Uploaded by

Jae Mi
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Exercise Questions

Chapter 7: Inventory

1. Discuss the disproportionate risk of holding inventory by retailers, wholesalers, and


manufacturers. Why has there been a trend to push inventory back up the channel
of distribution?

2. Customer-based inventory management strategies allow the use of different


availability levels for specific customers. Discuss the rationale for such a strategy.
Are such strategies discriminatory? Justify your position.

3. Discuss the relationship between service level, uncertainty, safety stock, and order
quantity. How can trade-offs between these elements be made?

4. Consumers are expressing increased demand for product customization in the form
of features, labeling, color or packaging. What is the impact of this trend on supply
chain inventory? What strategies can firms and supply chains use to mitigate this
impact?

Calculation Questions:

1. Mr. Stan Busfield, distribution center manager of Hogan Kitchenwares, must


determine when to resupply his stock of spatulas. The DC experiences a daily
demand of 500 spatulas. The average length of the performance cycle for
spatulas is 21 days. Mr. Busfield requires that 750 spatulas be retained as safety
stock to deal with demand uncertainty. What is the reorder point for spatulas?

2. Mr. Busfield recently completed a course in logistics management and now


realizes that there are significant costs associated with ordering and maintaining
inventory at his distribution center. Mr. Busfield has learned that the EOQ is the
replenishment logic that minimizes these costs. In an effort to find the EOQ for
measuring cups, Mr. Busfield has gathered relevant data. Mr. Busfield expects to
sell 50,000 measuring cups this year. Hogan acquires the measuring cups for 75
cents each from Shatter Industries. Shatter charges $8 for processing each order.
In addition, Mr. Busfield estimates his company’s inventory carrying cost to be
12 percent annually.

A. Find Mr. Busfield’s EOQ for measuring cups. Assume that Mr. Busfield accepts
ownership of products upon arrival at his DC.

B. Now assume Mr. Busfield must arrange for inbound transportation of the
measuring cups since Hogan accepts ownership of products at the supplier’s
shipping point. Quantities of fewer than 4,000 measuring cups cost 5 cents
per unit to ship. Quantities of 4,000 and above cost 4 cents per unit to ship.
Determine the difference in total costs associated with an EOQ of 4,000 units
and the EOQ level found in part (a) when transportation costs must be
considered.

C. Given the information above and the low cost EOQ alternative determined in
part (b), use period-order-quantity logic to determine the number of orders
Hogan would place each year for measuring cups and the time interval
between orders.

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