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inventory management : Forecasting

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1. A process is termed as six-sigma when the (circle one of the following):
a. process produces exactly six defects per million
b. design or customer tolerance limits are six standard deviations away from the mean
c. process control limits are set at six standard deviations from the mean
d. process control limits have six times the range of the design or customer tolerance limits

2. In a recent fiscal year, Exxon Mobil (the largest oil company in the world) had inventory turns of 17.1 while Procter & Gamble had inventory turns of 5.7. What factors might explain this difference in inventory turns?

3. Suppose a forecast has been determined using simple exponential smoothing. (a) When would the forecast lag the actual demand? (b) What would be the impact of increasing the smoothing constant a (or α) on the forecasts?

4. A retailer stocks two brands of bread, X and Y. Both brands have the same average daily demand of 100 but brand Y has higher variation in demand as measured by its standard deviation. Suppose we maintain the same inventory for both brands at the beginning of each day (left-over bread at the end of the day is thrown away), then
? Brand X will have a higher average fill rate than Brand Y
? Brand Y will have a higher average fill rate than Brand X
? Both brands will have the same average fill rate

5. How can the level of inventory be changed (increased or decreased) in a Kanban system and why is this done periodically?

6. What are the various strategies that can be pursued by a Company to improve operational performance and reduce supply-demand mismatches (i.e., overstocking and understocking)?

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