OPS 574 Wk 6 – Practice: Formative Assessment

Which of the following best explains why distributors help to reduce the space retailers need to store inventory?

multiple choice

• Distributors allow retailers to receive truckload shipments more frequently.
• Distributors decrease the total distance products travel in the supply chain.
• Distributors allow retailers to receive smaller quantities of each supplier’s product.

Distributors increase the time that inventory spends in the supply chain.

Which of the following statements best explains why distributors tend to spend less on storage space per square meter per year than retailers?

multiple choice

• Distributors provide break bulk service.
• Distributors don’t actually make products.
• Distributors can store more items per square meter and require space that is less aesthetically pleasing.

Distributors enjoy higher gross margins than retailers.

What is the relationship between a location’s in-stock probability and the lead time that location delivers on shipments to its customers?

multiple choice

• The higher the in-stock probability, the smaller the lead time.
• There isn’t a definitive relationship—a higher in-stock probability could mean a smaller or a greater lead time.
• The higher the in-stock probability, the greater the lead time.

Product A’s annual inventory turns is 4 and product B’s annual inventory turns is 6. Which product has the higher amount of inventory, measured in dollars?

multiple choice

• A
• B
• Cannot be determined (could be either one)

Which of the following is the best reason to add a second supplier for a critical component?

multiple choice

• The primary supplier is located in a flood-prone region, while the second supplier’s location is not subject to flooding.
• The second supplier is able to offer the same lead time as the first supplier.
• Adding a second supplier helps reduce the bullwhip effect.
• Adding a second supplier will increase the firm’s purchasing power for the component.

Tablets and laptops would be categorized as which type of inventory by an electronics retailer?

multiple choice

• Raw materials inventory
• Work-in-process inventory
• Finished goods inventory

Seasonal inventory

Computers lose value as they are stored in inventory. This is an example of which component of a firm’s inventory holding cost?

multiple choice

• Opportunity cost of capital
• Storage cost
• Spoilage cost
• Obsolescence cost

Which reason for holding inventory enables a firm to reduce the impact of large fixed costs that the firm incurs whenever it places an order to a supplier?

multiple choice

• Seasonality
• Uncertain demand
• Buffers
• Batching

A delivery truck from a food wholesaler has just delivered fresh meat and produce to a local restaurant. This meat and produce would be categorized as which type of inventory by the restaurant?

multiple choice

• Raw materials inventory
• Work-in-process inventory
• Finished goods inventory

Seasonal inventory

Product A’s annual inventory turns is 10 and product B’s annual inventory turns is 15. Which product has a higher months-of-supply?

multiple choice

• A
• B
• Cannot be determined (could be either one)