Based on the chart below, if the number of orders per 6 months increase from 5 o

Question

Based on the chart below, if the number of orders per 6 months increase from 5 orders per 6 months to 10 orders per 6 months, inventory needed to maintain the same fill rate: a. increases

b.decreases

c. stays the same

2. The primary driver for the answer to (1) based on the chart above involves:                       

Reorder point                                                                                                             

Order quantity

Cycle counting

3. If replenishment time decreases and fill rate remains the same, the reorder point will:

increase                                                                                                                      

decrease

stay the same

4. Reorder point always equals a multiple of reorder quantity:

True

False

5.  Reorder point inventory, conceptually described as safety stock (not cycle stock):

Helps cover demand that shows up during the time between when you replace a replenishment order and it actually arrives

Is dependent on order quantity

Is dependent on order cost

6. The graph below shows the following about implementation of Q, r policies:

Team following policy with inventory position staying between (r+1) and (r+Q)

Team not following policy

Team following policy of ordering two weeks worth every time there is two weeks of inventory left

INVENTORY $180,000 $160,000 $140,000 n $120,000 $100,000 9 $80,000 $60,000 $40,000 $20,000 40% 50 % 60% 70% 80 % 90 % 100 % Fill Rate 20 Orders/6 Montlh 5 Orders/6 Month rders/6 MonthPredicted Actual

Explanation / Answer

1. based on the inventory chart if the number of orders per 6 months increases fron 5 orders per 6 months to 10 orders per 6 months, inventory needed to fill same rate will DECREASE because the line drawn in blue colour for 10 orders per 6 months is below the line drawn in green colour for 5 orders per 6 months.

For example if the fill rate is around 80%, the total inventory investment for 5 order per 6 months will be around $80000 while on same fill rate i.e. on 80%, the total inventory investment for 10 orders per 6 months will be around $50000.

This shows the inventory needed will DECREASE if the order per 6 months increased from 5 orders per 6 months to 10 orders per 6 months.

2. The primary driver for the above answer based on the chart involves Fill Rate % i.e. CYCLE COUNTING because the inventory investment increases or decreases on the % of fill rate.

3. In case the replenishment time decreases and fill rate remains the same then the reorder point will INCREASE because the replenishment of the stock will be earlier. Therefore we can increase the reorder level because lead time or repleneshment time is reduced.

4.The reorder point always equals a multiple of reorder quantity is TRUE because if the reorder point is decreased the reorder quantity also gets reduced and if reorder point is increased the reorder quantity also increased. Therefore the statement mentioned at question 4 is TRUE.

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