19.

days of supply the number of days of business operations

that can be supported with the inventory on
hand
= Current inventory/Expected daily demand
58. demand
during lead
time
the amount of demand that occurs while
awaiting receipt of an inventory
replenishment order
72. dependent
demand
demand that depends upon decisions made
by internal operations managers
46. dependent
demand
inventory
systems
management systems used when the
demand for an item is derived from the
demand for some other item
15. difference
between order
& setup costs
Order costs are associated with replenishing
inventories, while setup costs are associated
with producing inventory internally. Both
are often considered "fixed" regardless of
batch size, although this is not strictly true.
21. Disadvantages
when
inventory
turnover is too
high
1) Stockout risk up
2) COGS up because of inability to purchase
or produce in quantity
3) Purchasing, ordering & receiving time,
effort and cost up
95. distribution
requirements
planning
(DRP)
determination of replenishement and
postioining of finished goods in the
distribution network
52. economic
order quantity
(EOQ)
order quantity that minimizes the sum of
annual inventory carrying cost and annual
ordering cost
99. enterprise
resource
planning
(ERP) system
software that consolidates all of the
business planning systems and data
throughout an organization
12. the expense
components of
carrying cost
1) Opportunity cost, including cost of capital
2) Owning/maintaining storage space
3) Taxes
4) Insurance
5) Obsolescence and loss
6) Materials handling, tracking,
management
8. the financial
impact of
inventory
Inventory is both an asset and a cost that
impacts profitability. Inventory represents
~30% of a company's assets, and it must be
purchased with debt or investment. Keeping
inventory low keeps investment/debt low
and keeps cash free to be used of other assets
or debt.
4. finished goods
inventory
items that are ready for sale to customers
26. ABC analysis the ranking of all items of inventory
acording to importance
100. advance
planning and
scheduling
(APS) systems
systems that integrate materials and
capacity planning into one system
20. Advantages of
high inventory
turnover
1) Sales volume up
2) Risk of obsolescence or having to make
discounts down
3) Holding expenses down
4) Asset investment down
5) Asset productivity up
38. aggregate
production
plan
specifies the production rates, inventory,
employment levels, backlogs, possible
subcontracting, and other resources needed
to meet the sales plan
81. available to
promise
the part of panned production that is not
committed to a customer
76. bill of
materials
(BOM)
a detailed description of an "end item" and
al ist of all of its raw materials, parts and
subassemblies
9. buffer (safety)
stock
extra inventory held to guard against
uncertainty in demand or supply
32. bullwhip
effect
small disturbance generated by a customer
produces sucessively larger disturbances at
each upstream stage in the supply chain
97. capacity
requirements
planning
(CRP)
an estimate of the capacity needed at work
centers
11. carrying
(holding cost)
expenses incurred due to the fact that
inventory is held
41. chase strategy
(aggregate
production
strategy)
production rate is changed in each period to
match the amount of expected demand
47. continuous
review model
inventory is constantly monitored to decide
when a replenishement order needs to be
placed
64. Cost of a unit
stockout =
Unit selling price - unit cost
65. Cost of being
overstocked
by one unit =
Unit cost + disposal cost - salvage value
80. cumulative
lead time
the longest lead-time path in the BOM
31. cycle counting process where each item in inventory is
physically counted on a routine schedule
60. cycle stock the portion of average inventory determined
as order quantity divided by two
Kemmer Summer Supply Chain Management Test 2
Study online at quizlet.com/_e2bxs
53. Five assumptions
underlying the EOQ
formulation
1) No quantity discounts
2) No lot size restrictions
3) No partial deliveries
4) No variability
5) Quantity of one product is not
dependent on that of another
54. Five steps to
determine order
quantity when
quantity discounts
are available
1) Identify the price breaks on offer
2) Calculate the EOQ at each price
break, starting with the lowest
3) Evaluate the feasibility of each
EOQ value
4) Calculate the TAC for each
feasible EOQ and for the minimum
quantity required to attain each price
break
5) Pick the order quantity that has
the lowest TAC
87. fixed order quantity
(FOQ)
an order for the same amount each
time
29. Global Trade Item
Number (GTIN)
item ID system for finished goods
sold to consumers (e.g. UPC. 12 or
14 digits)
89. gross requirements the total amount of an end item that
is required
35. Hard benefits of
S&OP
1) Improved forecast accuracy
2) Higher customer service with
lower finished goods inventory
levels due to better forecasts and
coordination fo supply with demand
3) More stable supply rates ->
Higher productivity for purchasing,
suppliers and operations
4) Faster and more controlled new
product introduction
55. How do lot size
restrictions impact
quantity discounts?
Lot size is the "batch size" of an
order, e.g. you must order in
increments of fifty - you should order
the increment with the lowest TAC.
24. impact of raw
material and
compontent part
stockouts
production processes halted
45. independent demand
inventory systems
inventory management systems used
when the demand for an item is
beyond the control of the
organization
71. independet demand demand that is created by customers
96. infinite loading the assumption that there is an
infinite amount of capacity available
1. inventory supply of items held by a firm to meet
demand
83. inventory status file file that contains detailed inventory
and procurement records
18. inventory
turnover
ratio between average inventory and the
level of sales:
= COGS/Average inventory@cost
= Net sales/Average inventory@sales
price
= Unit sales/Average inventory in units
84. items included in
the inventory
record
1) item number
2) item description
3) Lead time to order and receive the item
from a supplier or to produce it internally
4) Preferred order quantity (lot size)
5) Safety stock quantity
6) Other info (cost/process descriptions)
7) Quantity on hand
8) Quantity committed to a use
9) Scheduled receipts (ordered but not yet
recieved)
40. level production
strategy
(aggregate
production
strategy)
the firm produces at a constant rate over
the year
98. load profile comparison of production needs to actual
capacity
86. lot-for-lot (L4L) an order for the exact amount needed
69. Managerial
approaches to
reducing
inventory costs
Cycle stocks, safety stocks, managing
locations, implementing inventory
models
77. master
production
schedule (MPS)
quantities of each finished product to be
completed for each period
74. materials
requirements
planning (MRP)
a planning system used to ensure the
right quantities of materials are available
when needed
17. measures of
inventory
performance
1) Asset productivity issues: measured by
inventory turnover and days of supply
2) Effectiveness in meeting demand
requriements, a.k.a. service level
43. mixed or hybrid
strategy
a strategy that includes some elements of
level production and some elements of
chase production strategies
5. MRO inventory maintenance, repair and operating
supplies
94. nervousness inconsistencies in the plan causes by
changes to the MPS
91. net requriements the minimum amount needed in the
period
13. order cost expenses incurred in placing receiving
orders from suppliers, including order
preparation, transmittal, receiving, and
A/P processing
61. order
interval
a fixed time period that passes between
inventory reviews
75. Outputs of
materials
requirements
planning
(MRP)
primary reports (schedules of the planned
order releases that are used to trigger
purchases and production of items on time),
and secondary reports (cost, inventory and
schedule attainment information that helps
judge how well the operation is performing)
28. Pareto's law the rule that a small percentage of items
account for a large percentage of sales, profit,
or importance to a company
30. part number unique ID for a part used by a specific
company
88. periodic
order
quantity
(POQ)
an order for an amount that covers a fixed
period of time
48. periodic
review model
management system built around checking
and ordering inventory at some regular
interval
92. planned
order receipt
the amount that is planned to arrive at the
beginning of a period
93. planned
order release
the amount of an item that is planned to be
ordered in a period
79. planning
horizon
the entire time period covered by the MPS
10. product cost amount paid to suppliers for products that are
purchased
57. production
order
quantity
the most economic quantity to order when
units become available at the rate at which
they are produced (i.e. with partial order
deliveries)
27. quantitative
ABC analysis
procedure
1) Determine each item's annual useage/sales
(in units and/or value)
2) Determine % of total useage/sales by each
item
3) Rank items from highest to lowest
percentage
4) Classify the items into ABC categories
2. raw
materials
and
components
parts
items bought from suppliers to use in the
production of a product
56. reorder point
(ROP)
minimum level of inventory that triggers the
need to order more
90. requirements
explosion
the determination of how many additional
units are needed
7. the roles of
inventory
1) Balancing supply and demand
2) Buffering uncertainty in supply/demand
3) Enabling economies of buying
4) Enabling geographic specialization
37. rolling
planning
horizons
replan each period (month or quarter), for a
given number of periods into the future
82. rought-cut
capacity
planning
an estimation of the availability of the critical
resources needed to support the MPS
34. sales and
operations
planning
(S&OP)
process to develop tactical plans by integrating
customer-focused marketing plans for new and
existing products with the operational
management of the supply chain
51. saw-tooth
diagram
an illustration of the pattern of ordering and
inventory levels
85. Scheduled
Receipts
The quantity that has already been ordered by
someone, but not yet received
22. service
level
measure of how well the objective of meeting
customer demand is met: usually in terms of # or
% of inventory items for which there is no
inventory on hand
59. service
level policy
specification of the amount of risk of incurring a
stockout that a firm is willing to incur
14. setup cost administrative expenses and the expenses of
rearranging a work center to produce an item
63. single
period
inventory
model
model used to determine the order size for a one-
time purchase
36. Soft
benefits of
S&OP
1) Enhanced teamwork at executive & operating
levels
2) Better decisions with less effort and time
3) Better alignment of operational, marketing
and financial plans
4) Greater accountability for results
5) Ability to see potential problems sooner
68. square root
rule
a method of estimating the impact of changing
the number of lcoations on the quantity of
inventory held
23. stockout an event that occurs when no inventory is
available
16. stockout
(shortage)
cost
cost incurred when inventory is not available to
meet demand - cost of lost current and future
sales
66. target
service
level (TSL)
the probability of meeting all demand for an
item
= cost of a unit stockout / (cost of a unit stockout
+ cost of being overstocked by one unit)
25. Techniques
used to
manage
inventory
inventory classification, info systems, accurate
records
73. Three components of resource
requirements planning
1) MRP (Materials Requirements Planning)
2) DRP (Distribution Requirements Planning)
3) CRP (Capacity Requirements Planning)
42. three options to accomplish the objective
of a chase plan
1) Produce all units internally by hiring workers in high-demand monts and
firing/laying off workers in low-demand months
2) Produce internally the quantity required to meet demand in the lowest-demand
month and use overtime production to meet demand in other months
3) Produce internally the quantity required to meet demand in teh lowest-demand
month and use subcontracting to meet demand in other months
78. time bucket the individual time period for planning
50. total acquisition cost (TAC) sum of all relevant inventory costs incurred each year
67. total system inventory the sum of the inventory held across all of the locations in a company
6. transit inventory items in transit from ont location to another
49. Two basic questions to answer when
planning inventories
How much should be ordered and when?
70. two-bin system inventory of an item is stored in two different locations
39. Types of costs that must be identified and
quantified in aggregate planning
1) Inventory holding cost
2) Regular production cost
3) Overtime cost
4) Hiring cost
5) Firing/layoff cost
6) Backorder/lost sales cost
7) Subcontracting cost
62. uncertainty period a period of time when an unknown amount of inventory is on hand
33. vendor-managed inventory (VIM) vendor is responsible for managing the inventory located at a customer's facility
3. work in process inventory inventory that is in the production process
44. yield management process that adjusts prices as demand for a service occurs (or does not occur)