Question

In: Operations Management

True or False. 1) in the newsvendor model, we may need to place more than one...

True or False.

1) in the newsvendor model, we may need to place more than one order in a single decision period.

2) Organizations need work in process inventories to buffer for uncertainty and variability in processes.

3) in the basic EOQ model, the demand rate is a constant units per unit time.

4) The reorder point is the level of on-hand inventory at the instant an order should be placed

5) lot size-reorder point systems can be used when there is a setup cost and there is a positive load time

Expert Solution

Ans1) False

Reason - Newsvendor model is usually applicable for perishable goods so during a single decision period we cannot place more than one order because the manufacturing and transportation lead times are more and we have to suffice with excess demand being not met or with excess inventory.

Ex - Fresh vegetables,News papers etc.

Ans2) True

Reason - Demand is going to vary over a period of time and hence a safety stock has to be maintained,often industries maintain excess WIP (Work in progress) inventory to cater to safety stock demands so that organisation meets higher customer service levels

Ans 3) True

Reason - This is a basic assumption taken while formulating the EOQ model

Ans 4) True

Reason - Re -order as name suggests, to place an order when inventory reaches or braches this level

Ans 5) True

Reason - If Optimal lot size is not defined unnecessary setups will increase leading to more costs

and Reorder helps in getting the material on time without increasing the wait time at the machine

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keosha answered 6 months ago

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