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Unit 9: Inventory Planning and Control
6. The transportation cost of raw materials is included in ordering costs. Notes
7. For automobile major, Maruti Suzuki, Swift is an item that can be put in ‘A’ category as per
ABC classification.
8. In services, replenishing inventories quickly is very important to keep customers
satisfied.
9. In a general production situation, lead time can never be zero.
10. Economic Order Quantity concept was introduced by EW Taft in 1918.
Fill in the blanks:
11. A retail outlet lost 5 customers because they asked for RT Brand of soap, which was not
available. This will lead to ............................ costs.
12. The pen and paper, used to note down the details of raw material inventory, are a part of
............................ inventory for the textile mill.
13. If the focus is more on the pricing of the items in inventory rather than on usage, then
............................ classification is used.
14. ............................ is reached at by calculating lead time * yearly level.
15. ............................ is order level that balances average fixed ordering costs and inventory
holding costs.
9.9 Review Questions
1. Inventory control system may need to be modified as demand, costs, and competitive
pressures changes. What are the parameters that should be reviewed for the fixed reorder
quantity and periodic reorder systems?
2. What are the functions of inventory?
3. Annotate and analyse the term inventory costs.
4. Define inventory control by classification systems.
5. What do you understand by ABC classification and analysis?
6. Discuss the concept of inventory control systems.
Answers: Self Assessment
1. True 2. True
3. False 4. True
5. False 6. True
7. True 8. False
9. True 10. False
11. Stockout 12. Supplies
13. HML 14. Reorder Level
15. Economic Production Quantity
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