This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Chapter 17 - Inventory Control CHAPTER 17 INVENTORY CONTROL Review and Discussion Questions 1. Distinguish between dependent and independent demand in a McDonald’s, in an integrated manufacturer of personal copiers, and in a pharmaceutical supply house. The key to the answer here is to consider what must be forecasted (independent demand), and, given the forecast, what demands are thereby created for items to meet the forecasts (dependent demand). In a McDonald’s, independent demand is the demand for various items offered for sale—Big Macs, fries, etc. The demand for Egg McMuffins, for example, needs to be forecasted. Given the forecast, then, the demand for the number of eggs, cheese, Canadian bacon, muffins, and containers can then be computed based on the amount needed for each Egg McMuffin. The manufacturer of copiers is integrated, i.e., the parts, components, etc. are produced internally. The demand for the number of copiers is independent (must be forecasted). Given the forecast, the Bill of Materials is exploded to determine the amounts of raw materials, components, parts, etc. that are needed (more on the BOM in chapter 15). The pharmaceutical supply company is an extreme case where only end items are carried and nothing is produced internally. The bill of materials is the end item and, therefore, the independent demand (forecasted from customers) is the same as the dependent demand. One might attempt to consider that when the demand for items occurs together, that this is similar to a bill of materials. However, this is not a bill of materials, but rather a causal relationship making it easier to forecast. 2. Distinguish between in-process inventory, safety stock inventory, and seasonal inventory. In-process inventory consists of those items of materials components and partially completed units that are currently in the production process. Safety-stock inventory is set so that inventory is maintained to satisfy some maximum level of demand. It could be stated that safety stock is that level of inventory between the minimum expected demand and the desired level of demand satisfaction. Seasonal inventory is that inventory accumulated to meet some periodic increase in demand. 3. Discuss the nature of the costs that affect inventory size. The optimum inventory size is one that minimizes the combined total of holding cost, ordering (or setup) cost, shortage cost, and purchase cost. 217 Chapter 17 - Inventory Control 4. Under which conditions would a plant manager elect to use a fixed-order quantity model as opposed to a fixed-time period model? What are the disadvantages of using a fixed-time period ordering system? Fixed-order quantity models–when holding costs are high (usually expensive items or high deprecation rates), or when items are ordered from different sources....
View Full Document
- Spring '11
- Management, standard normal distribution