OM CH6

Question 1

Advantages of Inventory

Answer 1

• customer satisfaction because of quick response to demand
  (- economies of scale, I don’t know why though)
• smaller influence of rising price levels

Question 2

Disadvantages of inventory

Answer 2

• it may bring high inventory costs
• risk of aging of products (obsolescence)
• loss of products because of theft or damage

Question 3

Types of inventory

Answer 3

1- Raw Materials
2- Work-in-progress
3- Maintenance, repair, operation (MRO) = goods that have to be stored to keep the system going
4- Finished goods

Question 4

Customer Order Decoupling Point (CODP)

Answer 4

“point in the supply chain, from which the product flows to the customer, when the customer demands it “

• decision made at a strategic level
• also called push/pull boundary

Question 5

Downward movement

Answer 5

product flows towards the customer

Question 6

Upward movement

Answer 6

product flows back to the factory (due to a defect)

Question 7

Push Strategy

Answer 7

area to the left of the CODP in the supply chain

Question 8

Pull Strategy

Answer 8

area to the right of the CODP in the supply chain

Question 9

Advantages &; Disadvantages of CODP close to CONSUMER

Answer 9

Advantages

• quick delivery to consumer
• lower price to consumer, because of economies of scale

Disadvantages

• high risk of inventory
• products are usually standardized, the customer has little to say about the final product

Question 10

Advantages &; Disadvantages of CODP close to PRODUCER

Answer 10

Advantages

• customer has a say in the final product
• production occurs with minimal costs of inventory

Disadvantages

• it may take long for the product to be finished
• market can change in the meanwhile, making the product unnecessary

Question 11

Process Strategy &; the CODP

Answer 11

• make to stock (product focus) –> close to consumer
• Assemble to order (repetitive focus): semi-finished products. –> somewhere in the middle of the supply chain
• make to order (process focus): e.g. raw materials. –> far away from the consumers
• engineer to order: custom made products –> very close to the producer

Question 12

POQ annual usage

Answer 12

is the demand

Question 13

cycle counting

Answer 13

random counting of a part of the inventory and base your estimations for the rest of the inventory on this data.

Question 14

ABC analysis

Answer 14

Is a way of applying the cycle count.

You divide the inventory in 3 categories according to the euro-volume worth (TR product yields)

Question 15

Fixed order quantity models

Answer 15

EOQ, POQ, QOD