QUIZ -2     October 23, 2000

  Attempt all questions.
 

 1.  Recall that the total cost (holding plus setup cost) in an EOQ models is fairly insensitive to lotsize.  The following is an implication of this.

      (a) The EOQ model is useless because whatever lotsize we  choose, the cost is not going to be very different
      (b)  The EOQ model should be used only when holding costs are much higher than setup costs
      (c)  The EOQ model should be used only only when setup costs are much higher than holding costs
      (d)  The above insensitivity can be leveraged in multiproduct settings to schedule deliveries cost-effectively
 

 2.  In an inventory system following the base stock policy, it is observed that the backorder cost is Rs. 90 while the per unit inventory holding cost is Rs 10.  The demand distribution is  observed to be Poisson with rate of 10 demands during the replenishment lead time. If it required to achieve a fill rate of  90 percent, what can you say about the  optimal reorder point, base stock, and safety stock in this system?
 
  3. In the two echelon inventory system (with a distribution centre  as the first echelon and several retailer warehouses as the second echelon), that was studied in the class, explain in two lines each, the reason for the following  assumptions.

    (a) Base stock policies are followed at each retailer warehouse
    (b)  The demand distribution at each  retailer warehouse is Poisson

 4. State whether true or false, with a one line reason:

    (a) The bullwhip effect  can be completely eliminated if there is no forecasting whatsoever in any part of the supply chain
    (b)  The bullwhip effect can be completely eliminated if customer demand information is instantaneously made available at every upstream stage in the supply chain network.

 5. Due to prohibitive logistics costs, a particular retailer finds it convenient to order the quantity required for the next one month in one go. The demand in a typical month is observed to be a normal distribution with mean 1000 and standard deviation 200. How much should the retailer ideally order if ithe cost per unit left over is the same as the cost per unit of shortage.