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TUTORIAL QUESTIONS – MS29P

INVENTORY AND JUST-IN-TIME

1. List the nine activities involved in inventory management

2. Name and describe two (2) types of inventory

3. Describe two (2) factors to be considered in determining inventory stock quantity

4. Explain the importance to physical stock counts

5. There must be a clearly understood and followed procedure to obtain items from the
warehouse/stores. Discuss

6. Define lead time, carrying cost, order cost and stock-out cost (give examples)

7. A characteristics of Just-in-time purchasing with respect to quality is to:

(a) help suppliers to meet quality requirements
(b) have 100% incoming inspection
(c) impose maximum product specifications on the supplier
(d) none of the above

8. The main purpose of safety stock is to:

(a) reduce the likelihood of a stock-out due to variable demand during lead time
(b) have a good relationship with suppliers
(c) ensure that quality products are produced
(d) none of the above

9. The most significant obstacle to JIT is,

(a) inventory removal
(b) reorienting people’s thinking
( c) geography
(d) reducing machine set-up time
(e) all of the above

10. JIT is a system for:

(a) enforced problem solving
(b) reducing inventory
( c) increasing production capacity
(d) reducing set-up time
(e) all of the above
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11. A local TV distributor has found from experience that demand for a certain TV model
is fairly constant at a rate of 50 sets per month. Lead time is effectively zero and no
shortages are to be allowed. If the holding cost is $60 per unit per year and ordering
cost is estimated to be $50 per order.
(a) How many sets should be ordered to minimize inventory cost?
(b) What is the total inventory cost?
(c) How many orders will be processed per year
(d) What is the time interval between orders

12. Name four factors that hinders Just-in Time inventory in Jamaica

13. It takes approximately 2 weeks (14 days) for an order of steel bolts to arrive once the
order is placed. The demand for the bolts is fairly constant; on an average the manager
has observed that the hardware store sells 500 of these bolts each day. Because the
demand is fairly constant, she believes she can avoid stockouts completely if she orders
the bolts at the correct time. What is the reorder point?

14. Sande Johnson is attempting to perform an inventory analysis on one of her most
popular products. Annual demand for this product is 5,000 units; holding cost is $50
per unit per year. Order costs for her company typically run nearly $30 per order and
lead time averages 10 days. (Assume a 50-week year).
a) What is the economic order quantity?
b) What is the reorder point?
c) What is the total inventory cost?
d) What is the optimal number of orders per year?
e) What is the optimal number of days between orders (assume 200 working days
per year)?

15. Christine Adams, of Adams Plumbing, uses 1,200 of a certain spare part that costs $25
for each order and $24 annual holding cost. Calculate the total cost for order sizes of
25, 50 and 100. Identify the economic order quantity and consider the implications for
making an error in calculating the economic order quantity.

16. The goods section of a large department store sells 175 units per month of a certain
large bath towel. The unit cost of a towel to the store is $2.50 and the cost of placing an
order has been estimated to be $12.00. The store uses an inventory carrying charge of
27% per year. Determine the optimal order quantity, order frequency, and the annual
cost of inventory management. If, through automation of the purchasing process, the
ordering cost can be cut to $4.00, what will be the new economic order quantity, order
frequency, and annual inventory management cost? Explain these results.

D. Anthony Chevers