Inventory Control And Management 2nd Edition Donald Waters - Solutions

The more information a system can supply, the better the decisions made by management. Do you think this is true?
Where do the outputs from an inventory management information system go?
What are the main transactions in an inventory control system?
What is the minimum amount of information needed by an inventory control system?
What is an inventory management information system?
If we kept removing the assumptions in our analyses we would end up with a model that would accurately describe the operations of any stocks. Admittedly this model might be quite complex, but an organization would simply have to substitute the appropriate values to find its best inventory policy.
What features would you expect to see in a computerized inventory control package? Look at some commercial packages and compare the features they offer. (You can find information about many packages on the Web.)
What types of uncertainty are important in real inventory methods, but have not been included in the models we have described? How could we add these factors?
As they give lower stocks, fixed order quantity methods should be used whenever possible. Do you think that this is true?
If we include shortage costs, we find that the optimal order quantity is higher than the EOQ. The reasoning is that orders are bigger to avoid shortages. But the EOQ calculation assumes that shortages are so expensive that they must never occur. Has some calculation gone wrong?
Service level models assume that we can define an acceptable level of service.But surely we should be aiming for perfect service, in the same way that Total Quality Management aims for perfect quality. Is this a major flaw in these models?
By definition, we cannot predict uncertain things. What, then, is the point of building models that contain uncertainty?
Sherman (Wholesale) plc meet supply an item that has a mean demand of 200 units a week and standard deviation of 40 units. Stock is checked every 4 weeks and lead time is constant at 2 weeks. Each unit costs about £10 a week to store, what can you say about their options for inventory control?
Demand for an item is 100 units a week with a standard deviation of 10 units.Lead time is one week and the reorder level used is 115 units. What is the probability of running out of stock?
Suppose that you have recorded the lead time for an item as follows:Percentage of orders 5 10 15 40 15 10 5 Lead time (weeks) 1 2 3 4 5 6 7 The demand is constant at around 10 units a week and the economic order quantity has been calculated at 100 units. What ordering policy gives a cycle service
Lee Brothers advertise a 90 per cent cycle-service level for all stock items.Stock is replenished from a single supplier who guarantees a lead time of 4 weeks. What reorder level should they use for an item that has a Normally distributed demand with mean 2,000 units a week and standard deviation
Demand for an item is Normally distributed with a mean of 400 units a week and a standard deviation of 60 units. Ordering and delivery cost $300, holding cost is $12 a unit a year and lead time is constant at 3 weeks. Describe an ordering policy that gives a 95 per cent cycle-service level. What is
The demand for an item is Normally distributed with mean of 40 units and standard deviation of 4 units a month. The lead time is one month, shortage cost is £200, reorder cost is £40, and holding cost is £4. What are optimal values for the order quantity and reorder level?
Over the past few months, Kepfler and Associates have collected the following figures for demand of an electric transformer that they keep as a spare part for assembly equipment.
At the beginning of December Southern Conifers Limited employ a contractor to cut enough trees to meet the expected demand for Christmas trees. They sell these to a local wholesaler in batches of 100. Over the past few years the demand has been as follows.If it costs £16 to cut and trim a tree
In a given period demand for an item is equally likely to be any value between 100 and 199 units. Each unit of the item costs £75 and can be sold for £100. At the end of the period all unsold stock is passed to a recycler who pays £25 a unit. How many units would you buy for the period?
Why would a company decide to use a periodic review method?
Will the safety stock generally be higher for a fixed order quantity method or a periodic review method?
How is the order size calculated for a periodic review method?
In practice, the lead time demand is always Normally distributed. Do you think this is true?
What factors should affect the amount of safety stock?
A company keeps three weeks average demand as a safety stock. Does this seem reasonable?
Should the safety stock increase or decrease with increasingly variable demand?
Why is the lead time demand particularly important for uncertain demand?
Why is it usually impossible to guarantee a service level of 100 per cent?
How is the service level improved?
What is meant by ‘service level’?
What is safety stock and when is it used?
When is it better jointly to calculate reorder quantities and reorder levels?
All other things being equal, does adding a shortage cost raise or lower the best order size?
With stocks of spare parts, why did we not find an optimal order quantity?
What values are most difficult to find in the analyses in this section?
What happens if a marginal analysis suggests an order size Q, but we actually buy Q + 1 units?
Give some examples where single period models might be used.
What is a ‘single period model’?
Why is the uncertainty in lead time demand particularly important?
What is the difference between variability, uncertainty and ignorance in stocks?
Because there is usually uncertainty in stocks, deterministic models are of little practical use. Do you think this is true?
Where might you find uncertainty in an inventory system?
Every organization thinks that its problems with inventories are unique. To what extent do you think they are right?
It is often difficult to find reliable costs for stocks. With shortages this seems almost impossible – how do you find a cost for loss of goodwill or reduced future sales? Does this mean that any analysis of shortages is inevitably based on flimsy evidence?
Nobody likes waiting for a product they have decided to buy, so why would an organization deliberately work with shortages?
With a finite replenishment rate the order quantity is the economic order quantity multiplied by √(P/(P − D)). As the replenishment rate gets closer to the demand rate, this value gets larger, and the order size and average stock level both increase. But if the replenishment rate is equal to
We have looked at costs that vary in discrete steps, but how would you deal with costs that rise on a continuous sliding scale?
We have described some simple extensions to the economic order quantity, and could have looked at many more complicated models. When do you think that it is worth using a more sophisticated model, rather than using the guidelines given by a simple model?
Andrew McGregor forecast weekly demand for MP 411 pumps as follows:Week 1 2 3 4 5 6 7 8 9 10 11 Demand 1 6 10 21 18 7 4 3 2 4 15 Week 12 13 14 15 16 17 18 19 20 21 22 Demand 27 38 51 40 22 12 8 6 7 2 3
A company stocks four items with the following characteristics.Item Demand Unit cost Holding cost Reorder cost Space used(m3)1 500 200 35 80 4 2 300 100 20 100 3 3 200 300 45 120 6 4 400 200 40 80 5 Describe the effects of constrained space and investment on this system.
Demand for an item is constant at 100 units a year. Unit cost is £50, reorder cost is £40 and holding cost is 40 per cent of value a year. Any demand that occurs when no stock remains is lost. What is the minimum selling price that makes it profitable to stock the item?
John van Houghton looked at an inventory item and decided that the holding cost is about 25 per cent of value a year while the shortage cost for back-orders is 150 per cent of value a year. Unit cost is C–– 400 and reorder cost is C–– 100.Demand is constant at 300 units a year and all
Sulleman and Baring forecast demand for a component at around 2,500 units a year. They make the component internally, and it costs £500 to set up each production run with a variable cost of £30 a unit. Holding costs are 20 per cent of value a year and the production rate is 10,000 units a year.
Demand for an item is 500 units a month, while the production rate is 1,000 units a month. Unit cost is $10, batch set-up cost is $2,000 and holding cost is$1 a unit a month. What is the optimal batch size and corresponding cost? If the production rate can be varied, how will the costs change?
Last month La Cafe Pigalle was sent a new price list by their merchants. The ´cost of their most popular wine is now:Order quantity 0–99 100–399 400–999 1,000 or more Price per bottle C–– 20 C–– 19.40 C–– 18.80 C–– 18
Demand for an item is constant at 400 units a month. The reorder cost and delivery charge amount to £1,240 and the cost of holding stock is 30 per cent of value a year. A supplier quotes the following prices Order quantity 0–1,499 1,500–1,999 2,000–2,499 2,500 or more Unit cost £12.60
If the total investment in stock is limited, will the best order quantity for each item be greater or less than the economic order quantity?
How is the average stock level reduced when storage space is limited?
With independent demand inventory models, each item is considered as independent, so we do not consider interactions. Do you think this is true?
How would the economic order quantity change if we maximize revenue rather than minimize cost?
Why does the analysis for lost sales maximize revenue rather than minimize costs?
What does it mean when D × LC = √(2 × RC × HC × D)?
When are sales lost?
Are inventory systems with back-orders always more expensive than those without back-orders?
What do you think is the main problem with using the back-order analysis described?
When are inventory items back-ordered?
What happens to this analysis when the demand is greater than the replenishment rate?
Does a finite replenishment rate lead to larger or smaller batches than the economic order quantity?
Is DT (the part of a stock cycle when there is no production) longer or shorter than PT (the part when there is production)?
What is the maximum stock level when demand is greater than the replenishment rate?
If you find a valid minimum on a total cost curve, this shows the best order size. Do you think that this is true?
Where is the minimum point on a valid cost curve?
What is a ‘valid minimum’ on a total cost curve?
Which type of cost can vary with order quantity?
What are the benefits of short lead times? How can these be achieved in practice?
The variable cost rises slowly around the EOQ, and the analysis is based on a series of assumptions and approximations. Why, then, do we bother with the calculations rather than allowing inventory managers to design policies based on their experience? Would they get good results without bothering
What are the assumptions of the economic order quantity? How valid are these? What factors in real inventory control are not included in the economic order quantity model?
What costs are incurred by holding stock? How would you set about finding these? Why are shortage costs so difficult to find?
The main concern of an organization is customer service, and this often needs high stocks. Why, then, are we concentrating on minimizing the cost of stock, when we should be more concerned with raising stock levels?
(a) Arcadia Windings is concerned about its stocks of copper cable. The demand for this is 8,000 metres a week, with a cost of £4 a metre. Each order costs £350 for administration and £550 for delivery, and has a lead time of 8 weeks. Holding costs are about 25 per cent of value held a year, and
Demand for an item is constant at 40 units a week, and the economic order quantity is calculated to be 100 units. What is the reorder level if lead time is constant at 4 weeks? What is the effect of adding some margin of safety and raising the reorder level by ten units? What happens if the lead
Per Norstrom supplies computer systems to a warehouse in Rotterdam.He sells 16 systems a week. The cost of an average system is C–– 5,000, while order administration costs and delivery from Malaysia cost C–– 1,000. The lead time is around 4 weeks and holding costs are around 16 per cent a
A company is introducing a new item and it has forecast likely demand next year as between 100 and 130 units. The costs are uncertain, but the reorder cost is somewhere between $50 and $70, and the holding cost is between 20 per cent and 25 per cent of unit cost a year. If the unit cost is$200,
Demand for an item is constant at 1,000 units a year. Unit cost is £50, reorder cost is £100, holding cost is 25 per cent of value a year and no shortages are allowed. Describe an optimal inventory policy for the item.What order size will give a variable cost within 10 per cent of optimal?What is
Orders should be placed when stock on hand declines to the reorder level;does this mean that continuous monitoring of stock levels is needed?
If demand for an item is 10 units a week, the economic order quantity is 30 units and the lead time is 7 weeks, how many orders will be outstanding when it is time to place another order?
What is the reorder level?
If you are uncertain about the values used to find an EOQ, would you generally prefer larger or smaller orders?
Do the assumptions and other limitations of the economic order quantity calculation mean it has no practical value?
If we use the economic order quantity, which is bigger, the reorder cost component or the holding cost component?
What does the variable cost per unit time vary with?
If we place orders that are larger than the EOQ, why does the total cost rise?
What is the EOQ?
What assumptions are made in calculating an economic order quantity?
It is a gross simplification to say that there are only three basic questions of inventory control. Do you agree with this?
In practice it can be difficult to find the costs of holding stock. Why is this? How can these difficulties be overcome? Are there any other views of inventory costs that could be easier to work with?
The framework for all inventory decisions is set by higher decisions, and a balance of internal and external factors. What exactly does this mean, and is it necessarily true?
Is it really possible for stores of goods sitting in a warehouse to have a strategic impact on an organization?

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Inventory Control And Management 2nd Edition Donald Waters - Solutions

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