The company uses a planning system that focuses first on the amount and timing of finished goods demanded and then determines the derived demand for raw material, components, and subassemblies at each of the prior stages of production. This system is referred to as:
Answer(s): B
Materials requirements planning CIRF) is usually a computer-based information system designed to plan and control raw materials used in a production setting. It assumes that estimated demand for materials is reasonably accurate and that suppliers can deliver based upon this accurate schedule. It is crucial that delivery delays be avoided because, under CIRF, production delays are almost unavoidable if the materials are not on hand. An MRF system uses a parts list, often called a bill of materials, and lead times for each type of material to obtain materials just as they are needed for planned production.
An inventory planning method that minimizes inventories by arranging to have raw materials and subcomponents arrive immediately preceding their use is called:
Answer(s): C
JIT is a manufacturing philosophy popularized by the Japanese that combines purchasing, production, and inventory control. As with MFP, minimization of inventory is a goal; however, JIT also encompasses changes in the production process itself. An emphasis on quality and a "pull" of materials related to demand are key differences between JIT and MFP.The factory is organized so as to bring materials and tools close to the point of use rather than keeping them in storage areas. A key element of the JIT system is reduction or elimination of waste of materials, labor, factory space, and machine usage. Minimizing inventory is the key to reducing waste. V1lhen a part is needed on the production line, it arrives just in time, not before. Daily deliveries from suppliers are the ultimate objective, and some Japanese users have been able to get twice-daily deliveries.
One of the elements included in the economic order quantity EOQ) formula is:
The basic EOQ formula is used to minimize the total of inventory carrying and ordering costs. The basic EOQ equals the square root of a fraction consisting of a numerator equal to the product of twice the unit periodic demand and the variable cost per order and a denominator equal to the unit periodic carrying cost. Using an EOQ analysis assuming a constant demand), it is determined that the optimal order quantity is 2,500. The company desires a safety stock of 500 units. A five-day lead time is needed for delivery. Annual inventory holding costs equal 25% of the average inventory level. It costs the company U $4 per unit to buy the product, which it sells for U $. It costs the company U $150 to place a detailed order, and the monthly demand for the product is 4,000 units.
Annual inventory holding costs equal:
Given that demand is constant and the EOQ is 2,500 units, the average inventory level--1 without regard to safety stock is 1,250 units 2,500 - 2). Adding safety stock results in an average level of 1,750 units 1,250 + 500). Given also that annual holding costs are 25% of average inventory and that unit cost i s U $4, total annual holding cost i s U $1 ,750 [(1 ,750 units : $4) 25%]. Using an EOQ analysis assuming a constant demand), it is determined that the optimal order quantity is 2,500. The company desires a safety stock of 500 units. A five day lead time is needed for delivery. Annual inventory holding costs equal 25°!a of the average inventory level. It costs the company US $4 per unit to buy the product, which it sells for US $8. It costs the company US $150 to place a detailed order, and the monthly demand for the product is 4,000 units.
Total inventory ordering costs per year equal:
Total annual demand is 48,000 units 4,000 per month x 12). Hence, total annual ordering costs equal US $2,880 [$150 cost per order 48,000 units - 2,500 EOQ)].
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