【正文】 perience.) Increasing the service level requires increasing the amount of safety stock. 12. The ABC approach refers to the classification of items stocked according to some measure of importance (., cost, costvolume, criticalness, cost of stockout) and allocating control efforts on that basis. 13. In effect, this situation is a “quantity discount” case with a time dimension. Hence, buying larger quantities will result in lower annual purchase costs, lower ordering costs (fewer orders), but increased carrying costs. Since it is unlikely that the pressor supplier announces price increases far in advance, the purchasing agent will have to develop a forecast of future price increases to use in determining order size. Unlike the standard discount approach, the agent may opt to use trial and error to determine the best order size, taking into account the three costs (carrying, ordering and purchasing). In any event, it is reasonable to expect that a larger order size would be more appropriate。 although obsolescence may also be a factor. Operations Management, 9/e 304 14. Annual carrying costs are determined by average inventory. Hence, a decrease in average inventory is desirable, if possible. Average inventory is Qo/2, and Qo decreases (run size model) if setup cost, S, decreases. 15. The SinglePeriod Model is used when inventory items have a limited useful life (., items are not carried over from one period to the next). 16. Yes. When excess costs are high and shortage costs are low, the optimum stocking level is less than expected demand. 17. A pany can reduce the need for inventories by: a. using standardized parts b. improved forecasting of demand c. using preventive maintenance on equipment and machines d. reducing supplier delivery lead times and delivery reliability e. utilizing reliable suppliers and improving the relationships in the supply chain f. restructuring the supply chain so that the supplier holds the inventory g. reducing production lead time by using more efficient manufacturing methods h. developing simpler product designs with fewer parts. Taking Stock 1. a. If we buy additional amounts of a particular good to take advantage of quantity discounts, then we will save money on a per unit purchasing cost of the item. We will also save on ordering cost because since we bought a larger quantity, we will not have to order this item as frequently. However, as a result of ordering larger quantity, we will have to carry larger inventory in stock, which in turn will result in an increase in inventory holding cost. b. If we treat holding cost as a percentage of the unit price, as the unit price increases, so will the holding cost, and as a result, if we are using the EOQ approach, we will have to place a smaller order, resulting in a lesser inventory. On the other hand, if we use a constant amount of a holding cost, the inventory decisions will not be affected by the changes in unit cost (price) of the item. c. Conducting a cycle count once a quarter instead of once a year will result in more frequent counting, which will result in an increase in labor and overhead costs. However, the more frequent counting would also lead to less errors in inventory accuracy and more timely detection of errors, which in turn would lead to timely deliveries to customers, less work in process inventory, more efficient operations, improved customer service, and assurance of material availability. 2. In making inventory decisions involving holding costs, setting inventory levels and deciding on quantity discount purchases, the materials manager, plant manager, production planning and control manager, the purchasing manager, and in some cases the planners who work in production planning and control or purchasing departments should be involved. The level and the nature of involvement will depend on the anizational structure of the pany and the type of product being manufactured or purchased. 3. The technology has had a tremendous impact on inventory management. The utilization of bar coding has not only reduced the cost of taking physical inventory but also enabled real time Instructor’s Manual, Chapter 12 305 updating of inventory records. The satellite control systems available in trucks and automobiles has enabled panies to determine and track the location of intransit inventory. Critical Thinking Exercise 1. Including a wider range of foods provide fast food panies with a petitive edge in terms of improving customer satisfaction and service. However, it has also plicated the operational function of the pany. Expansion of menu offerings can create problems for inventory management because there are more ingredients and inventory items to order and to control the levels of inventory. This means higher labor costs in terms of placing orders, increased storage facility needs and increased need for coordinating the shipments from the supplier so that deliveries can be at low cost and efficient. Increasing the variety of items on the menu will also cause problems with forecasting. Since we have more items on the menu, it is likely that the demand for current menu items will decrease. The forecasts for all items will need to be revised. If we are not able to estimate this possible decrease, then the forecasting problem will result in excess or insufficient inventory levels. 2. a. How important is the item? For example, does it relate to a holiday or other important event, such as graduation cards? b. Are parable substitutes readily available? c. What petitor alternatives are available to customers? d. Is this an occasional occurrence, or indicative of a larger, perhaps ongoing, problem? Memo Writing Exercises (included on the DVD) 1. Cost of carrying inventory must be weighted against the followin