A manufacturing company is attempting to implement a just-in-time JIT) purchase policy system by negotiating with its primary suppliers to accept long-term purchase orders which result in more frequent deliveries of smaller quantities of raw materials. If the JIT purchase policy is successful in reducing the total inventory costs of the manufacturing company, which of the following combinations of cost changes would be most likely to occur?
Answer(s): D
The objective of a JIT system is to reduce carrying costs by eliminating inventories and increasing the deliveries made by suppliers. Ideally, shipments are received just in time to be incorporated into the manufacturing process. This system increases the risk of stockout costs because the inventory buffer is reduced or eliminated. The diagram presented represents the economic circler quantity ECQ) model.
Which line segment represents the reorder lead time?
The quantity of inventory on hand is represented by they axis and time by the axis. The reorder lead time is represented by the line segment BC. The diagram presented represents the economic circler quantity ECQ) model.
Which line segment identifies the quantity of safety stock maintained?
Answer(s): B
Quantities of inventory are shown along they axis. Safety stock is represented by the line AE. The diagram presented represents the economic circler quantity ECQ) model.
Which line segment represents the length of time to consume the total quantity of materials ordered?
Answer(s): C
Time is shown along the axis. The line segment AC depicts the time to consume an entire order to reduce the inventory to the safety stock).
The Huron Corporation purchases 60,000 headbands per year. The average purchase lead time is 20 working days, and the maximum lead time is 27 working days. Safety stock equals 1,750 units. The corporation works 240 days per year. Huron should reorder headbands when the quantity in inventory reaches:
The reorder point is the quantity on hand when an order is placed. If it has 20-day normal lead time, a safety stock of 1,750 units, and usage of 250 units per day, an order should be placed when 27 days of inventory are on hand, a total of 6,750 units 250 units 27 days). Jed Ryerson Computer Furniture, Inc. RCF) manufactures a line of office computer chairs. The annual demand for the chairs is estimated to be 5,000 units. The annual cost to hold one unit in inventory is US 10 per year, and the cast to initiate a production run is US $1,000. There are no computer chairs on hand, and RCF has scheduled four equal production runs of computer chairs for the coming year, the first of which is to be run immediately. RCF has 250 business days per year, sales occur uniformly throughout the year, and production start-up is within one day. RCF is considering using the following formula for determining the economic order quantity EOQ):If: A = cast to initiate a production run per purchase order D = annual unit demandK = cost of carrying one unit per year
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