Professional Documents
Culture Documents
Inventory
Lead time
Lot Size
Inventory
Demand Forecasting
SKU
Independent vs Dependent Demand
All 8 Inventory Classifications
Making vs Buying
TCO
Vertical Integration
Forward and Backward Integration
Steps in purchasing process
MR, RFQ, PO
E-procurement system
Centralized vs Decentralized purchasing
Supplier base
Choosing a supplier
Supplier scorecards
Supplier certifications
Single vs. Multiple suppliers
Also, be sure to read all introductory sections: Stuff, Car, etc.
12. Explain the benefits of Hondas Best Practices program to both Honda Suppliers
and Honda.
Below is a list of the items most likely to be tested from the lectures. This list is
not necessarily complete, but it is a helpful guide.
Introduction to Inventory
Lead time
Lot size
SKU
Shrinkage
Inventory and types of inventory
Relationship between risk and inventory
Purchasing considerations
Costs associated with inventory
Inventory Classifications - long-term, seasonal, safety stock, market, pipeline, anticipation
Basic Forecasting Models
Qualitative and Quantitative forecasting
On your own material: Simple moving average and Weighted moving average
Total Cost of Inventory and EOQ
High vs Low inventory Benefits, downsides, tradeoffs
Cycle stock
Costs of inventory
Be able to discuss, explain, and use the Total Cost Formula. Formulas, calculations, graphs, etc.
The lab exercise and problems are good indications of what the exam might contain.
Total cost formula Know all parts of the formula.
On your own material: Time between orders
EOQ - Fully understand this concept, calculations and all associated the graphs.
o What does it mean if AHC > AOC? AHC < AOC?
o How do you know if you are above or below the EOQ?
Procurement Basics
Purchasing process
Make or Buy decision
Centralized and Decentralized purchasing
Key issues to consider in choosing a supplier
Supplier scorecards, Supplier certification
Importance of relationship management between buyers and suppliers
Vertical integration, Forward and backward integration
Be aware that the primary examples given in the lecture and charts or
illustrations used in class may also be tested.
8000
153.85
D/52
21.92
D/365
Unit Cost ( C )
$16.00
$40.00
Holding Cost ( % of C )
25.00%
$4.00
C * 0.25
(Q/D) 52
(D/Q) S
D/Q
Q/2
AOC
Lot Size
Orders/Yr
(Order Size)
Time
Between
Orders
(weeks)
Order Cost
(Q/2) H
AHC
TC
Average
Inventory
Carrying
Cost
Total Cost
100
80.0
0.65
50
$200.00
$131,400.00
200
40.0
1.3
100
$400.00
$130,000.00
300
26.7
1.95
150
$600.00
400
20.0
2.6
200
$800.00
500
16.0
3.25
250
$1,000.00
600
13.3
3.9
300
$1,200.00
700
11.4
4.55
350
$1,400.00
$129,857.14
800
10.0
5.2
400
$1,600.00
$130,000.00
1800
1600
1400
1200
1000
800
600
400
200
100
200
300
400
500
600
700
800
900
b. TC if Q=EOQ
c. TBO if Q=EOQ
a. Find EOQ
EOQ =
2SD
H
b. TC if Q=EOQ
TC =
TC =
TC =
2 ($125) 15,000
$3.00
DC
+
Item Cost +
15,000 (10) +
+
(Q/2) H
AHC
(1118/2) 3
TC =
150,000
TC =
________________
+
+
+
____________
(D/Q) S
AOC
(15,000/1118) 125
+
____________
COST
Annual Holding Cost
Total Cost
1118
1118.03
QUANTITY (Q)
NOTE: When Q is greater than EOQ, AHC > AOC. You are holding too much.
When Q is less than EOQ, AHC < AOC. You need to hold more inventory.
c. TBO if Q=EOQ
T.B.O. = [ ( Q / D) 52] Weeks
T.B.O. = ____________
What is the Time Between Orders in weeks if they use the present lot size?
G Which lot size will give them the lowest annual inventory cost?
H How many orders will they place if they use the EOQ?
I
What is the Total Annual Inventory Cost (include DC) if they use EOQ?
Period
1
2
3
4
5
6
7
8
9
10
11
12
Sales Volume
25,502
24,946
25,911
26,245
26,454
26,269
26,452
26,804
25,396
26,256
31,365
28,226
5. What are the 4 period moving average forecasts for periods 5 through 12?
6. What are the 3 period moving average forecasts for periods 5 through 12?
7. What would be the forecast for periods 5 through 12 using a 4 period weighted moving
average? The weights for each period are 0.1, 0.2, 0.3, and 0.4 from the oldest period to the
most recent period, respectively.
8. What would be the forecast for periods 5 through 12 using a 3 period weighted moving
average? The weights for each period are 0.1, 0.3, and 0.6 from the oldest period to the most
recent period, respectively.
Use the following Data Set to complete the problems that follow. Try using both a
calculator and a spreadsheet to solve these problems:
Period
1
2
3
4
5
6
7
8
9
Sales Volume
37,792
39,562
41,330
42,141
42,455
42,032
41,538
41,605
41,727
10
11
12
42,899
42,677
43,459
9. What are the 4 period moving average forecasts for periods 5 through 12?
10. What are the 3 period moving average forecasts for periods 5 through 12?
11. What would be the forecast for periods 5 through 12 using a 4 period weighted moving
average? The weights for each period are 0.1, 0.2, 0.3, and 0.4 from the oldest period to
the most recent period, respectively.
12. What would be the forecast for periods 5 through 12 using a 3 period weighted moving
average? The weights for each period are 0.1, 0.3, and 0.6 from the oldest period to the
most recent period, respectively.
4.
A. 2.215 orders
B. 325 units
C. $3250
D. $110.77
E. $118,560.77
F. 23.47 Wks
G. 120 units
H. 12 orders
I. 60 units
Problems 5 through 8
Forecast
for Period:
5
6
7
8
9
10
11
12
25,700.67
26,203.33
26,322.67
26,391.67
26,508.33
26,217.33
26,152.00
27,672.33
25,810.70
26,131.90
26,283.90
26,376.80
26,556.40
26,116.90
26,127.20
28,182.40
26,014.90
26,337.00
26,322.10
26,397.30
26,644.90
25,924.00
26,052.80
29,235.40
Problems 9 through 12
Forecast
for
Problem 8 Problem 9 Problem 10
Period:
5
40,206.25 41,011.00 40,947.00
6
41,372.00 41,975.33 41,846.50
7
41,989.50 42,209.33 42,110.50
8
42,041.50 42,008.33 41,929.90
9
41,907.50 41,725.00 41,755.30
10
41,725.50 41,623.33 41,683.10
Problem 11
41,639.80
42,248.30
42,169.80
41,777.90
41,627.60
41,671.50
J. $600
K. $600
L. $116,400
M. 4.33 Weeks
N. $2,160.77
11
12
41,942.25
42,227.00
42,077.00
42,434.33
42,152.50
42,446.40
42,418.00
42,648.60