Circle the answers: Given the following changes, inventory safety stocks should $($all else

equal$)$:

Lead times increase Increase Decrease No Effect

Demand becomes more certain Increase Decrease No Effect

Service level increases Increase Decrease No Effect

Q$*$ increases Increase Decrease No Effect

Standard deviation of demand increases Increase Decrease No Effect

Making forecasts using the Newsvendor technique is best used for:

A Items whose annual demand is known with relative certainty

B Items for which it is important to achieve a desired level of customer service

C Items which have a long product life cycle

D Items which may be described as $$fashion goods$$ or goods with a short product life cycle

According to our text, cycle service level is best defined as:

A The fraction of total demand satisfied by existing inventory

B The quality of service given to a customer

C The minimum amount of inventory necessary to maintain a process throughput

D The probability that there will be no stockout within an order cycle

E The buffer inventory used to decouple the process from its environment

According to our text, safety inventory $($stock$)$ is best described as:

A Half the order size

B The inventory in excess of the average or in excess of forecast demand

C The minimum amount of inventory necessary to maintain a process throughput

D The average inventory due to a batch activity

E The buffer inventory used to decouple the process from its environment

SCENARIO $$ MERCHANDISING POLICY FOR LL BEAN:

LL Bean is trying to sell a new type of wool lined$/$waterproof hiking boot during this winter

season. They must make all the boots now in anticipation of the peak sales season. After

February all boots will be immediately sold for $$5.$ Additional information on the boots: Selling

Price $-$ $$50/$unit ; Cost of Product $-$ $$20/$unit$.$ What would be the optimal service level to provide

customers for this seasonal product?

If forecast demand is for $500,000$ pairs of boots, with a standard deviation of $50,000,$ how many

boots should be produced?

Suppose you purchase a $$4-$per$-$unit part from a supplier with which you assemble red widgets.

On average, you use $50,000$ units of this part each year. The recommended selling price of the

product is $$5-$per$-$unit. Every time you order this particular part, you incur a sizable ordering cost

of $$800$ regardless of the number of parts that you order. Your cost of capital is $20\%$ per year.

A$)$ How many parts should you purchase each time you place an order? B$)$ If the lead time is $4$

weeks, what is the re$-$order point $($ROP$)$ assume no safety stock is used? C$)$ If the standard

deviation of the weekly demand forecast is $50$ and you want to guarantee a $90\%$ in$-$stock level,

what is the ROP with Safety Stock?