L$014-4$

$12.$ 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.

$5.$ 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