Inventory Management Ch7 Pt 3

• What is the purpose of a Kanban ordering system?

  To manage inventory flow using visual signals.
• What does a Kanban signal represent in the inventory management process?


  It indicates when to order a product or materials.
• How does Kanban inventory management help businesses?


  It minimizes excess stock and reduces warehouse space requirements.
• What are the different types of Kanban signals used in inventory management?

  • Cards
  • Flags
  • Visual signals within the manufacturing process
• How can everyday life examples explain the concept of Kanban?


  By relating it to actions like refueling a car when the petrol gauge is low.
• What is a common method used in a Kanban system to signal stock refill?

  Colored bins or reorder cards.
• What happens when a worker reaches the end of a bin in a Kanban system?

  The worker orders stock or informs purchasing for a stock purchase.
• What are the key differences between push and pull inventory strategies?

  • Push Strategy:
  • Forecasts sales and produces accordingly
  • Higher holding costs
  • Large purchase orders
  • Pull Strategy:
  • Low inventory levels
  • Produces goods based on customer orders
  • Higher ordering costs but lower holding costs
• What is the reorder point (ROP) in inventory management?

  It indicates when to reorder stock to avoid running out.
• How do you calculate the average sales per day if total sales for three months are 1200 units?


  $\text{Average sales per day} =$$\frac{1200}{90} =$$13.33 \text{ units per day}$
• How do you calculate the average lead time for three months with lead times of 2, 1, and 3 days?

  $\text{Average lead time} =$$\frac{2 + 1 + 3}{3} =$$2 \text{ days}$
• What is the formula for calculating the reorder point (ROP)?


  $\text{ROP} =$$(\text{Average daily sales} \times \text{Average lead time}) +$$\text{Safety stock}$
• If the average daily sales are 13.3 units, average lead time is 2 days, and safety stock is 100 units, what is the ROP?


  $\text{ROP} =$$(13.3 \times 2) +$$100 =$$26.6 +$$100 =$$126.6 \text{ units}$
• What does a reorder point of 41 units mean for stock management?


  It indicates that when stock levels reach 41 units, it's time to place a new order.
• What steps should be taken to calculate the reorder point for a shoe retailer?

  1. Calculate average sales per day.

  2. Calculate average lead time.

  3. Add safety stock.

  4. Use the ROP formula:

  $\text{ROP} =$$(\text{Average daily sales} \times \text{Average lead time}) +$$\text{Safety stock}$
• How do you calculate the average sales per day for a shoe retailer with total sales of 190 units over 90 days?


  $\text{Average sales per day} =$$\frac{190}{90} =$$2.11 \text{ shoes per day}$
• What is the average lead time for a shoe retailer with lead times of 5 days for three months?

  $\text{Average lead time} =$$\frac{5 + 5 + 5}{3} =$$5 \text{ days}$
• If the safety stock for a shoe retailer is 30 units, what is the ROP using the previously calculated average sales and lead time?

  $\text{ROP} =$$(2.11 \times 5) +$$30 =$$10.55 +$$30 =$$40.55 \text{ shoes}$
• What does the ROP of 41 units mean for a shoe retailer?

  It indicates that when stock levels reach 41 units, it's time to reorder to maintain safety stock.