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Exam 12: Managing Uncertainty in a Supply Chain: Safety Inventory

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Question 21

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The appropriate level of safety inventory is determined by the uncertainty of both demand and supply and the desired level of cycle inventory.

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Question 22

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Typically,in continuous review policies,the lot size to order

A) is not known until after the order is placed.
B) is the same as in a periodic review policy.
C) varies with the square root of demand.
D) is kept fixed between replenishment cycles.

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Question 23

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Explain the impact of aggregation on safety inventory.

Lead time is the gap between

What is the descriptive term for demand that occurs not in a steady stream of single units but in periodic large lots?

The trade-off that a supply chain manager must consider when planning safety inventory is

Weekly demand for avocados at the Guac Shop is normally distributed with a mean of 2500 and a standard deviation of 650.The store manager has decided to follow a periodic review policy to manage inventory of avocados.They plan to order every two weeks.The farmers currently take two weeks to fill an order.Given a desired CSL of 97.5 percent,how much safety inventory should the Guac Shop carry? What should their OUL be?

It is better to carry more safety inventory downstream if

Carrying excessive inventory can help counter demand volatility when new products come on the market.

Product availability reflects a firm's ability to fill a customer order out of available inventory.

Which approach to aggregation requires an information system that allows access to current inventory records from each location?

________ is the ability of a supply chain to delay product differentiation or customization until closer to the time the product is sold.

Describe the two types of ordering policies and the impact each has on safety inventory.

The lower the coefficient of variation of an item,the greater the reduction in safety inventories as a result of centralization.

A goal of any supply chain manager is to

Scenario 12.3 - The Cat Café Daily demand for cat litter at the Cat Café in Jones is 1500 ounces with a standard deviation of 300 ounces.The proprietor orders the best cat litter money can buy online,and the average shipping time is 5 days.Of course,if the order is placed at the end of the week,then it may take a while longer to receive the shipment,so the standard deviation of lead time is 2 days.The state health department keeps a close eye on the condition of the Cat Café;a cat-loving inspector visits at least twice a week,ostensibly to inspect,but mostly to pet his favorite Scottish Fold cat named Groundskeeper Willie. -Suppose the café wishes to erase any hint of impropriety and wants to peg their service level at 99%.How many days of safety inventory they should carry?

Often,safety inventory calculations in practice

Scenario 12.1 - Charm City Avon Barksdale's operation uses large quantities of prepaid cell phones,on average 500 per week with a standard deviation of 45.The lead time for their own brand of prepaid cell phones is two weeks and they have a lot size of 125 phones. -What is the average flow time of a phone if the reorder point used by Mr.Barksdale is 2000 phones?

Figure 1: Inventory Profile for Periodic Review Policy -What does the distance F-E represent in Figure 1?

Product fill rate is the fraction of product demand that is satisfied from product in inventory.