$8.$ Suppose inventory is managed using the order$-$up$-$to model. The inventory position is $20$ and demand in the last period was $10.$ What is the target in$-$stock probability?

a$.95$ percent

b$.96$ percent

c$.97$ percent

d$.98$ percent

e$.99$ percent

f$.$ Could be any of the above a$$e

g$.$ Cannot be any of the above a$$e

LO$14-3$

$9.$ If the target in$-$stock probability increases, then the expected time between stockouts:

a$.$ increases.

b$.$ remains the same.

c$.$ decreases.

d$.$ could increase or decrease.

$10.$ Demand each period is normally distributed and an order$-$up$-$to model is used to decide order quantities. Which of the following influences the chosen order$-$up$-$to level $($i$.$e$.,$ a change in which of the following would change the chosen order$-$up$-$to level$)?$

A$.$ The mean of demand in one period

B$.$ The standard deviation of demand over $($L $+1)$ periods

C$.$ The target in$-$stock probability

a$.$ Only A

b$.$ Only B

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c$.$ Only C

d$.$ A and B

e$.$ A and C

f$.$ B and C

g$.$ A$,$ B$,$ and C

$11.$ Suppose in the order$-$up$-$to model the target in$-$stock probability is $\mathrm{.}95$ and demand across periods is independent and normally distributed. If the lead time is doubled but the target in$-$stock probability remains $\mathrm{.}95,$ what happens to the order$-$up$-$to level?

a$.$ It more than doubles $($increases by more than a factor of $2).$

b$.$ It doubles $($increases exactly by a factor of $2).$

c$.$ It increases but by less than a factor of $2.$

d$.$ It decreases.

e$.$ The answer cannot be determined with the given information.

LO$14-4$

$12.$ A firm uses the order$-$up$-$to model to manage its inventory. It wants to increase its in$-$stock probability while decreasing its holding costs $($i$.$e$.,$ reducing its average inventory$).$ Which of the following actions will help to achieve this goal? $($Consider each action independently.$)$

A$.$ Decrease the lead time.

B$.$ Increase the order$-$up$-$to level.

C$.$ Increase the average quantity on order.

a$.$ Only A

b$.$ Only B

c$.$ Only C

d$.$ A and B

e$.$ A and C

f$.$ B and C

g$.$ Any of them will help $($i$.$e$.,$ A$,$ B$,$ or C$).$

h$.$ None of them will help.

$13.$ In the order$-$up$-$to model, assume that the mean of demand in a period remains the same and the target in$-$stock probability is kept at a constant level. If the demand uncertainty $($the standard deviation of demand in each period$)$ increases, then:

a$.$ expected on$-$hand inventory increases.

b$.$ expected on$-$hand inventory decreases.

c$.$ expected on$-$hand inventory remains the same.

d$.$ expected on$-$hand inventory may increase or decrease, depending on the demand distribution and other parameters.

$14.$ Suppose the order$-$up$-$to model is used to manage inventories. The firm is planning changes that will reduce the lead time to receive replenishments because the firm anticipates that the coefficient of variation of demand will increase even though mean demand per period remains the same. What can be said about the likely change in the firm$$s on$-$order inventory?

a$.$ It will surely decrease.

b$.$ It will remain the same.

c$.$ It will surely increase.

d$.$ More information is needed to determine the impact of these changes.

$15.$ Suppose inventory is managed using the order$-$up$-$to model. Which of the following actions will certainly lead to a higher order$-$up$-$to level? In all cases, assume the characteristics of the demand process do not change.

A$.$ Increase in the target in$-$stock probability $($for the same lead time$)$

B$.$ Increase in the lead time $($for the same in$-$stock probability$)$

a$.$ A only

b$.$ B only

c$.$ A and B

d$.$ None of the above

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$16.$ Anna Litic, a new supply chain manager at High Precision Inc. $($HP$)$ decides to check some data on the supply chains she manages. She discovers that HP$$s in$-$transit inventory of electronic components from its Tacoma, Washington, factory to its Asian distribution center $($DC$)$ has increased from two quarters ago. However, the distribution of demand at the Asian DC has not changed over this period of time. Anna knows that the Asian DC manager is controlling inventory to achieve a fixed in$-$stock probability target, so she is happy to see that indeed the in$-$stock inventory at the Asian DC has also not deviated off the target. Anna wonders what has happened to the Asian DC$$s average inventory. What is she likely to discover regarding the Asian DC$$s on$-$hand inventory?

a$.$ On$-$hand inventory has not changed because the in$-$stock probability has not changed at the Asian DC$.$

b$.$ On$-$hand inventory has increased because the lead time from Tacoma, Washington, to the Asian DC must have increased.

c$.$ On$-$hand inventory has not changed because average demand has not changed at the Asian DC$.$

d$.$ On$-$hand inventory has decreased because the variability of demand must have decreased.

e$.$ It is not possible to predict what Anna is likely to observe with respect to the change in on$-$hand inventory; that is$,$ it could be lower, higher, or unchanged.

LO$14-5$

$17.$ Which of the following is a strategic decision for a grocery retailer?

a$.$ The number of boxes of cereal to order in the first week of a month

b$.$ Whe