Describe the different types of costs associated with inventory.

Describe the different types of costs associated with inventory.
Question 1

a) Describe the different types of costs associated with inventory.
(10 marks)

b) Explain the relative merits of the Reorder Point and Reorder Cycle inventory management methods. Give examples of two types of situation suited to Reorder Point and two types of situation suited to Reorder Cycle.
(10 marks)

Question 2

a) What are the potential risks associated with having too much capacity?
(5 marks)

b) What are the potential risks associated with having too little capacity?
(5 marks)

c) To reconcile capacity and demand we might operate with level capacity, chase demand with variable capacity or manage demand to level it. Discuss the relative merits of these three approaches.
(10 marks)

Question 3

a) Using a suitable step-response diagram and a suitable noise-response diagram, explain the effect of the smoothing constant (typically denoted by a) when using exponential smoothing to forecast demand, and therefore the compromise that is made in selecting a particular value.
(8 marks)

b) Using suitable diagrams, explain how the strategic stockholding decoupling point in a leagile supply chain protects operations upstream of this point from demand amplification. What are the benefits of being protected?
(8 marks)

c) If a supply chain became faster, what change to the position of the decoupling point would this allow in principle and what advantages would this give?
(4 marks)

Question 4

a) Explain why vertical integration upstream in a supply chain is seen as a defensive move whilst vertical integration downstream is seen as an offensive move. For each direction, give an example of a business that has done this and explain why it has done it.
(8 marks)

b) Explain what is meant by economies of scale and why this is a major consideration when making vertical integration decisions.
(4 marks)

c) Joint learning by supplier and customer can occur when a partnership is formed. Describe important examples of this joint learning and why it is valuable.
(4 marks)

d) When would a buyer seek to leverage market uncertainty and what does this mean?
(4 marks)

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