Managing Uncertainty In A Supply Chain: Safety Inventory

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Questions Bank

Understanding the Supply Chain
Supply Chain Performance: Achieving Strategic Fit and Scope
Supply Chain Drivers and Metrics
Designing Distribution Networks and Applications to e-Business
Network Design in the Supply Chain
Designing Global Supply Chain Networks
Demand Forecasting in a Supply Chain
Aggregate Planning in a Supply Chain
Sales and Operations Planning: Planning Supply and Demand in a Supply Chain
Coordination in a Supply Chain
Managing Economies of Scale in the Supply Chain: Cycle Inventory
Managing Uncertainty in a Supply Chain: Safety Inventory
Determining the Optimal Level of Product Availability
Transportation in a Supply Chain
Sourcing Decisions in a Supply Chain
Pricing and Revenue Management in a Supply Chain
Sustainability and the Supply Chain

All Questions

Question 1

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Safety inventory is inventory carried for the purpose of satisfying demand that exceeds the amount forecasted for a given period.

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Question 2

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Raising the level of safety inventory increases product availability and thus the margin captured from customer purchases.

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Question 3

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Carrying excessive inventory can help counter demand volatility when new products come on the market.

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Question 4

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The appropriate level of safety inventory is determined by the uncertainty of both demand and supply and the desired level of cycle inventory.

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Question 5

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Product availability reflects a firm's ability to fill a customer order out of available inventory.

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Question 6

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Product fill rate is the fraction of product demand that is satisfied from product in inventory.

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Question 7

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With periodic review, inventory status is checked at regular intervals and an order is placed to raise the inventory level to a specified threshold.

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Question 8

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For the same safety inventory, an increase in lot size increases the fill rate but not the cycle service level.

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Question 9

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A goal of any supply chain manager is to reduce the level of safety inventory required regardless of the affect product availability.

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Question 10

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A reduction in supply can help dramatically reduce safety inventory required without hurting product availability.

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Question 11

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Aggregation reduces the standard deviation of demand only if demand across the regions being aggregated is not perfectly positively correlated.

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Question 12

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In case demand in different geographical regions is about the same size and independent, aggregation increases safety inventory by the square root of the number of areas aggregated.

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Question 13

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The lower the coefficient of variation of an item, the greater the reduction in safety inventories as a result of centralization.

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Question 14

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Manufacturer-driven substitution increases overall profitability for the manufacturer by allowing some aggregation of demand, which reduces the inventory requirements for the same level of availability.

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Question 15

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Postponement allows the supply chain to delay product differentiation, which results in disaggregating most of the inventories in the supply chain.

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Question 16

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When using a continuous review policy, a manager has to account for the uncertainty of demand during the lead time and the review interval.

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Question 17

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Cycle inventory is inventory carried to satisfy demand that exceeds the amount forecasted for a given period.

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Question 18

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Given the product variety and high demand uncertainty in most high-tech supply chains, a significant fraction of the inventory carried is safety inventory.

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Question 19

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Inventory carried for the purpose of satisfying demand that exceeds the amount forecasted for a given period is

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cycle inventory.

demand inventory.

safety inventory.

security inventory.

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Question 20

Multiple Choice

Safety inventory is carried because

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demand forecasts are accurate.

demand forecasts are uncertain.

adequate supplies are available.

excess product was manufactured.

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