1) For an order-up-to model with lead time L periods, which of the following statement is TRUE
Order will be placed every L + 1 periods
Order will be received every L + 1 periods
Inventory decision is made to balance the supply and demand over L+1 periods
Safety stock increases proportionally in lead time L, i.e., if lead time L increases n times, safety stock also increases n times
2) Demand each period is normally distributed and an order up-to model is used to decide order quantities. Which of the following influences the chosen order up-to level (i.e., a change in which of the following would change the chosen order up-to level)?
I. The mean of demand in one period
II . The standard deviation of demand over L+1 periods
III. The target in-stock probability
a) Only I
b) Only II
c) Only II
d) I and II
e) I and III
f) II and III
g) I, II and III
3) Which of the following statement of risk pooling effect is NOT true
Risk pooling effect improves the business’s profit by attracting more demand
Risk pooling effect reduces the inventory holding cost by reducing safety-stock
Risk pooling effect is more significant when the inventory consolidation scale is larger
Risking pooling effect enables the business to achieve the same critical ratio using less inventory