Test Inventory Management

Inventory Management

2. With the advent of low-cost computing, do you see alternatives to the popular ABC classifications? The alternatives would be that by minimizing the sums of the set-up cost and carrying-cost, you would also minimize the overall costs.

5. Explain the major assumptions of the basic EOQ model.

1. Demand for an item is known, reasonably constant, and independent of decisions for other items.

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2. Lead time, the time between placement and receipt of the order, is known and consistent.

3. Receipt of inventory is instantaneous and complete, the inventory order arrives in one batch at one time.

4. Quantity discounts are nor possible.

5. The only variable costs are the set-up and holding costs.

6. Stockouts can be completely avoided if orders are placed at the right times.

7. What is the relationship of the economic order quantity to demand? To the holding cost? To the set-up costs? The relationship is that with both EOQ and demand, that the demand for the items are known, and independent of decisions. The holding costs and set-up costs are reduced substantially over time by planning for them correctly.

8. What are the advantages of cycle counting?

Inventory items are counted, records are verified, and inaccuracies are periodically documented . You can then trace the inaccuracies and the appropriate remedial action is taken to ensure the integrity of the inventory system.

9. What impact does a decrease in setup time have on EOQ? It is an excellent way to reduce inventory investment and to improve the productivity.

11. What is meant by service level? It is the concern of management in maintaining an adequate service level in the face of uncertain demand.

17. How are inventory levels monitored in retail stores?

Inventory is monitored at retail stores using the Perpetual inventory system. This keeps track of each withdrawal or addition to inventory continuously, so that the records are always correct.

1. Develop an inventory plan to help ZBC. I think that an EOQ inventory would be good for ZBC because of the demand for the item is known, lead time is known and consistent, receipt for inventory is instantaneous, quantity discounts could be possible, stockouts could be completely avoided if the orders are placed at the right times. This would reduce their loss of money for not having the inventory on hand that they need. Which would mean bigger profits for them, and by ordering more they would be able to receive discounts on the inventory items.

2. Discuss the ROPs and total costs. Well the ROP at ZBC needs to be addressed because the items ordered are taking way to long to get which makes the lead time much longer than what it needs to be, and in return it is making the total cost rise because of the money they incur for each order they make.

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