Which of the following factors is considered a carrying cost?
Answer(s): C
Obsolescence is the loss of value or usefulness of an item due to changes in technology, fashion,customer preferences, or other factors. Obsolescence is considered a carrying cost, because it is an expense associated with holding inventory over a period of time1. Carrying costs are the various costs a business pays for holding inventory in stock, such as warehousing, insurance, taxes, depreciation, and opportunity costs2. Obsolescence can increase the carrying costs of inventory, because it can reduce the demand and sales potential of the item, and may require the item to be written off or sold at a lower price3.The other options are not considered carrying costs, because they are not related to holding inventory in stock. Setup is the cost of preparing a machine or a process for production. Transportation is the cost of moving goods from one place to another. Scrap rate is the percentage of defective or unusable units produced in a process. These costs are more related to production or distribution activities than inventory holding activities.
Which of the following is an example of implosion in distribution requirements planning (DRP)?
Answer(s): A
Implosion in distribution requirements planning (DRP) is the process of calculating the gross requirements for a supplying location based on the net requirements of its customers or demand sources1. Implosion is the opposite of explosion, which is the process of calculating the net requirements for a demand source based on the gross requirements of its customers or demand sources2. Implosion and explosion are used to synchronize the supply and demand across different levels of the distribution network3.An example of implosion in DRP is gathering information from several field locations and aggregating it at the manufacturing facility. This example shows how the manufacturing facility, which is the supplying location, can determine its gross requirements by adding up the net requirements of its field locations, which are its customers or demand sources. This way, the manufacturing facility can plan its production and inventory levels to meet the demand from the field locations.
A technique to manage load variability would be to:
Answer(s): B
Load variability is the fluctuation in electricity demand over time. It is influenced by factors such as weather conditions, time of day, day of the week, and various external events. The higher the load variability, the more challenging it becomes to accurately predict demand and plan capacity1. A technique to manage load variability would be to plan additional safety capacity as a part of total available capacity to meet unplanned demand. Safety capacity is the act of consistently planning your production below capacity. The reason for this is so the company can become more flexible and responsive to the changing needs of the customer2. For example, if your company was operating at full capacity and your best customer needed extra product, you would be unable to meet their request. By allowing for safety capacity, your company can become more flexible and more responsive.The other options are not techniques to manage load variability, because they are either irrelevant or ineffective. Applying capacity planning using overall factors (CPOF) to identify priority items at the work center is a simple approach to capacity planning that applies historical ratios. These ratios are based on the master production schedule along with established production standards3. However, this method does not account for load variability or unexpected changes in demand or supply. Designing the shop floor with machines that sit idle until additional demand requires their use is a wasteful and costly way of managing load variability. It does not optimize the utilization of resources or minimize the inventory costs4. Using capacity bills to provide a rough-cut method of planning total-time-per-unit value is a procedure based on the manufacturing production schedule (MPS). It indicates the total standard time required to produce one end product in each work center required in its manufacture5. However, this method does not address the fluctuations in demand or supply that may occur due to load variability.
A balanced scorecard is a performance measurement approach that involves:
Answer(s): D
A balanced scorecard is a performance measurement approach that involves linking financial and non-financial performance measures to organizational goals. According to the web search results, a balanced scorecard is a strategic planning and management system that organizations use to communicate what they are trying to accomplish, align the day-to-day work with strategy, prioritize projects, products, and services, and measure and monitor progress towards strategic targets1. A balanced scorecard focuses on four key perspectives: financial, customer, internal business process, and learning and growth2. Each perspective includes objectives, measures, targets, and initiatives that are aligned with the organization's vision, mission, and strategy3. By using a balanced scorecard, organizations can balance the short-term and long-term objectives, the financial and non-financial outcomes, and the internal and external stakeholders.
An analysis was done on a group of parts that showed a missed delivery resulting in lost sales on other product lines many times greater than the value of the initial lost sale. As a result, the company launched an initiative to increase the fill rate on these parts to 100%. Currently, they have raised the fill rate to 99%. As they continue the initiative, what effects are most likely expected?
Fill rate is the percentage of customer orders that are fulfilled without running out of inventory or placing backorders1. Fill rate is an important measure of customer service and inventory management efficiency. A high fill rate indicates that the company can meet customer demand in a timely and accurate manner, while a low fill rate suggests that the company is struggling to satisfy customer expectations.Operating costs are the expenses associated with running a business, such as rent, utilities, wages, transportation, etc2. Operating costs are influenced by various factors, such as production volume, inventory level, technology, and quality. A high operating cost means that the company spends more money to produce and deliver its products or services, while a low operating cost means that the company spends less money to do so.Service level is the measure of how well a company delivers its products or services to its customers, based on criteria such as availability, timeliness, quality, and satisfaction3. Service level is affected by various factors, such as demand variability, supply reliability, capacity utilization, and customer feedback. A high service level means that the company meets or exceeds customer expectations, while a low service level means that the company fails or falls short of customer expectations. As the company continues its initiative to increase the fill rate on these parts to 100%, it is most likely that operating costs will increase faster than service level. This is because increasing the fill rate requires increasing the inventory level, which in turn increases the carrying costs, such as warehousing, insurance, taxes, and obsolescence4. Moreover, increasing the fill rate also requires reducing the variability and uncertainty in demand and supply, which may involve investing in more advanced technology, improving quality control, enhancing supplier relationships, or implementing demand management techniques5. These actions can also increase the operating costs of the company.However, increasing the fill rate does not necessarily increase the service level at the same rate. This is because service level depends not only on fill rate, but also on other factors, such as delivery speed, order accuracy, product quality, and customer satisfaction6. Therefore, increasing the fill rate may not be enough to improve the service level significantly. In fact, there may be a point of diminishing returns, where increasing the fill rate beyond a certain level does not result in a proportional increase in service level. For example, increasing the fill rate from 95% to 99% may have a noticeable impact on service level, but increasing it from 99% to 100% may have a negligible impact on service level.
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