Discussion and Review Questions Assignment 5
Discussion and Review Questions Assignment 5
Chapter 13 – Inventory Management
7.
a. List the major assumptions of the EOQ model.
1. Each EOQ model describes one product.
2. It is necessary to know the information about annual demand.
3. The demand should be fixed and unchanged during the whole year.
4. The execution rime is also fixed.
5. EOQ will work if every order is taken in one delivery.
6. EOQ needs to have no quantity discounts.
b. How would you respond to the criticism that EOQ models tend to provide misleading results because values of D, S, and H are, at best, educated guesses?
Like any other forecast, EOQ is based on assumptions and basic information about supply and demand trends. D, S, and H are precise values, where D is demand per year, S is cost per order, and H is cost of holding a unit. Although the mentioned above values should be concrete, no one can tell for sure what amount of orders will be necessary to operate the next year. Nevertheless, people need at least approximate information about EOQ because it is necessary to make up plans for the next production period. Therefore, EOQ as an attempt to calculate an optimal order quantity provides a highly demanded information, though being with some level of uncertainty, which is always present in making forecasts.
12. Describe briefly the A-B-C approach to inventory control.
A-B-C approach means that all the inventories are classified into three categories according to their importance and value to the company. On practice it means that A items, which are of the highest importance, conclude up to 20 per cent of all inventories. However, the A-items take more than 60 per cent value of all the inventories. B-items have middle consumption value. And finally, C-items have the lowest consumption value. However, the number of such items is more than 50-60 per cent of all inventories.
17. What are some ways in which a company can reduce the need for inventories?
One of the ways to reduce the need for inventories id to follow Fixed-Quantity Ordering model. In such a case, it is possible to plan the inventories, as the quantity is fixed. Therefore, the risk of stockout is minimized. One more way to reduce the unexpected need for inventories is to create an enough big safety stock. There is also a Just-in-Time system, which creates and moves goods just as they are needed.
Chapter 14 – JIT and Lean Operations
1. Some key elements of production systems are listed in Table = 14.3. Explain briefly how lean systems differ from traditional production systems for each of those elements.
Unlike traditional system, lean manufacturing produces high variety of goods but in low volume. The production is made on demand, that is why there is almost no need in inventory storage. Provided that the products are not identical. Each worker is able to perform various operations. The management in the lean system has a simpler structure with a fewer layers. Every team-member is almost irreplaceable, so the teams are rather strong, as well as discipline inside them. Relationship with the suppliers are long-term, although the number of them is fever than in traditional production system.
4. What are some of the main obstacles that must be overcome in converting from a traditional system to lean?
First of all, the top-management should be aware of the subsequent changes. Even more, every worker should agree with the changes and be ready for the changed regime of work. Then it is necessary to decide and convert the parts of production cycle, which are necessary for setting up lean system. Also the suppliers should also work in the Just-in-Time regime. And one of the main things is to prepare for the obstacles, which will probably occur.
9. What are the main benefits and risks of small lot sizes?
Lean systems, which are characterized by small lot sizes, have a range of benefits. The waste, costs, and cycle time are reduced. At the same time, the quality, flexibility, and productivity of the system are increased. However, there are some risks in lean systems. Workers might feel increased stress because if there are some unexpected problems, fewer resources or supply chain problems might atom the manufacturing process.
Chapter 15 – Supply Chain Management
5. What is the bullwhip effect, and why does it occur? How can it be overcome?
The bullwhip effect is one of the common problems in the supply chain management. It occurs when there is no proper coordination between demand and supply chain. Due to the improper understanding of customers` demand, the supplier produces more items than are sold to the customers at the end. Such fluctuations occur mostly due to price variations, past and irrelevant demand information, and lack of communication between the links in a supply chain. In order to overcome such fluctuations, the manufacturer might change high-low pricing strategy into fixed-price contracts policy. However, the first thing, which is necessary to do, is to exclude demand forecast inaccuracies.
16. Discuss the importance of RFID for supply chain management.
Radio frequency identification (RFID) on practice works quite similar to barcodes but PFID contains more information. It helps to provide supply chain with visibility and therefore to improve management quality control. As a consequence, the quality of relationship between suppliers and customers become better.
21. Explain the benefit of cross-docking.
The main benefit of cross-docking is an ability to minimize storage costs by avoiding warehouse storage. In this technology, the goods, which arrived at the supplier`s truck, are loaded not at a warehouse, but on the outbound truck.
