Inventory management: Practice Questions

A business has a daily usage of \(80\) units and a lead time of \(6\) days for deliveries from its supplier. If the business maintains a buffer inventory of \(300\) units, what is the re-order level?

In inventory management, which of the following is categorized as an opportunity cost of holding high levels of inventory?

A manufacturing company holds a buffer inventory of \(400\) units. It operates at a constant usage rate of \(150\) units per day, has a supplier lead time of \(4\) days, and places a standard re-order quantity of \(1{,}200\) units whenever inventory reaches the re-order level.

Calculate the re-order level and the maximum inventory level reached immediately after a standard delivery arrives.

Using the following data, calculate the re-order level for a retailer: Lead time is 5 days, maximum daily usage is 40 units, and minimum daily usage is 10 units. Explain the importance of maintaining a buffer inventory in this scenario.

Analyze how the implementation of a Just-in-Time (JIT) inventory system influences a business's working capital requirements and its relationship with suppliers.

For a business that maintains high levels of inventory, there are several financial and operational implications.

Explain two distinct costs associated with holding high levels of finished goods inventory for a retailer specializing in seasonal fashion clothing.

The following information describes the inventory movements of a manufacturing plant over a month:
The re-order level is set at \(500\) units, the lead time from the supplier is \(4\) days, and the average daily usage is \(100\) units.

(a) Define the term buffer inventory.
(b) Using the data provided, calculate the required buffer inventory level.
(c) Explain how a failure in the supply chain could lead to a stock-out situation.