1 What are the primary reasons for holding inventory?

2 What are the requirements for effective inventory management?

3 Briefly describe each of the costs associated with inventory.

4 What potential benefits and risks do RFID tags have for inventory management?

5 Why might it be inappropriate to use inventory turnover ratios to compare inventory performance of companies that are in different industries?

6 List the major assumptions of the EOQ model.

7 How would you respond to the criticism that EOQ models tend to provide misleading results because values of D, S, and H are, at best, educated guesses?

8 Explain briefly how a higher carrying cost can result in a decrease in inventory.

9 What is safety stock, and what is its purpose?

10 Under what circumstances would the amount of safety stock held be

a Large?

b Small?

c Zero?

11 What is meant by the term service level? Generally speaking, how is service level related to the amount of safety stock held?

12 Describe briefly the A-B-C approach to inventory control.

13 The purchasing agent for a company that assembles and sells air-conditioning equipment in a Latin American country noted that the cost of compressors has increased significantly each time they have been reordered. The company uses an EOQ model to determine order size. What are the implications of this price escalation with respect to order size? What factors other than price must be taken into consideration?

14 Explain how a decrease in setup time can lead to a decrease in the average amount of inventory a firm holds, and why that would be beneficial.

15 What is the single-period model, and under what circumstances is it appropriate?

16 Can the optimal stocking level in the single-period model ever be less than expected demand? Explain briefly.

17 What are some ways in which a company can reduce the need for inventories?