LOGISTICS TEST 2 REVIEW (F2023)

• Test will be written Week 7 in the test lab in E014

• Test consist of short answer, true/false and multiple-choice questions
• Covers chapters 7 & 8
• Calculator required
• Paper will be provided for calculation questions. Be sure to put your name and student number on
the paper. You must submit paper to staff before leaving the test lab.
• You will have 60 minutes to complete the test. Please take your time and read questions carefully.
• Test is worth 15% of your final grade

George Brown College is committed to the highest standards of academic integrity. Cheating and
plagiarism are serious offenses and will result in a zero grade. Please read the Academic Integrity Policy
on our website at https://www.georgebrown.ca/policies

Resources:
Lecture notes Class discussions
Powerpoint slides In-class assignments
Textbook Weekly topic notes provided by Professor
Handouts Review notes- provided below
Additional resources provided on BB- reading
course material,
Brightspace videos, case studies
pate

Chapter 7: Demand Management, Order Management and Customer service

What was covered?
Demand Management
➢ What is it?
• Why is it important?
• Results of an inaccurate demand forecast
• Two techniques: quantitative & qualitative
• The various methods within the two techniques
• Demand sensing

➢ How does decisions in demand management impact the other activities in the logistical channel-
such as order management and inventory management for example?

➢ CPFR--What is it? Benefits? Challenges?

➢ Metrics used in demand management?

Order management
➢ Importance of order management
➢ Order cycle
o What is it?
o The four stages: what is happening at each stage?
▪ Order transmittal
▪ Order Processing (3 key stages involved here)
▪ Order picking & assembly
▪ Order delivery
➢ Metrics used in order management?
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Customer Service Management
➢ What is the definition from a logistics perspective?
➢ 4 dimensions—what are they? Why are they important with respect to customer service?
➢ How does demand management and order management decisions impact customer service levels?
➢ Metrics for customer service management?
➢ Four (4) managerial considerations with respect to developing a customer service strategy
o Setting goals and objectives
o Establishing metrics
o Customer profitability analysis
o Service failure and service recovery

Chapter 8: Inventory Management

❖ The attempt to balance inventory needs & requirements with the need to minimize cost resulting
from obtaining and holding the inventory

What is inventory?
❖ Stocks of goods & materials that are maintained for many purposes- most common is to satisfy
normal demand
Forms of Inventory:
• Raw Material • Purchased & manufactured parts
• Work in progress • Finished Goods

Inventory Classifications based on function:

• Cycle or base stock • Speculative stock
• Safety or buffer stock • Psychic
• Pipeline or in-transit stock

❖ What are the issues/challenges companies face with respect to managing inventory?

❖ Questions that Inventory Management answers:

• What to purchase?
• How much to purchase?
• When to purchase?
• Where to store?

Costs associated with Inventory:

❖ Carrying cost - what makes up the carrying cost?
❖ Ordering cost- what makes up the ordering cost?
❖ Stockouts--Have cost to company- how do you determine this cost?
• brand loyal customer will buy from you only, therefore costless
• delayed customer will come back with product in stock
• lost customer—most costly to company

❖ Trade-off between carrying cost and ordering cost?

❖ Trade-off between Carrying Costs and Stock out?

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When to order? How much to order? -- 2 models used:
❖ Fixed Order Interval
Order is placed at the same time such as weekly, biweekly, or monthly
Quantity is the variable
Higher risks of stock outs with this approach therefore usually required more safety stock than other
method

❖ Fixed Order Quantity

Order same quantity each time order is placed
When order is placed is the variable
Requires: constant inventory monitoring- therefore, more time and money than other method
ROP- what is ROP?
EOQ— (Used in the fixed order quantity model)
• Is the point where carrying cost equals ordering costs (approximately)
• i.e. the optimum quantity of inventory to purchase to minimize the annual cost of ordering
and carrying items in inventory
• Many assumptions made with use of EOQ

Inventory Flow Charts

Illustrates how Safety Stock can prevent Stockouts where there is an increase in demand and longer
than normal Replenishment Cycle

ABC Analysis- selective inventory management approach

Not all inventory is equal: therefore, should not be managed in same way
Categorize in terms of:
• Value
• Criticality (Vital, essential, Desirable)
• Usage Frequency (fast, slow, no moving)
• Dead Inventory

Also, must think about how to manage inventory of:

• Complementary Products
• Substitute products
• Parts & components for machines used in operations ( Service Parts Logistics)

Inventory turnover- Formula? What is the importance of this ratio?

Contemporary Approaches to Inventory Management

➢ Lean Inventory Management- JIT, ECR, Quick Response
What conditions must be present for this inventory management approach to work?
➢ VMI, Postponement (covered previously), Technology